What Are The Four Fundamental Economic Choices? Describe Each And Give An Example Of Each Choice.


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Frances Bott answered
The four choices are as follows:-

• What to produce?
Using the example of a luxury car range, the range would need to be carefully structured to take in technological innovations in the field, particular needs in the market and pricing structures, for example. Once all of these factors have been incorporated, the cars could be produced. The necessary market research should identify what customers expect. This then needs to be tailored to the particular ability to actually manufacture the cars.

• How shall it be produced?
This would cover the siting of the production plants for the cars, whether it is cheaper or more efficient to outsource labor or contractors for the components, union agreements and labor conventions in a particular area, as well as the actual method of physically building the vehicles. 

• What resources need to be used to produce the product?
The availability of resources to build a car would be the reserves of metals and plastics, their location relative to the manufacturing plants and the selection of the materials that are going to make up the car.

It may be easier and cheaper to place a factory next to a steel mill than have to source the steel from thousands of miles away and import it to the factory, incurring more costs. It may be more efficient to use local resources, but labor factors abroad may bring down the prices of materials against those in a domestic market.

• Who is the product actually for?
Market research needs to determine precisely which group of people will be buying the product. It would be no use setting up a company to manufacture and sell luxury cars to a native population of a country with no financial means to afford the cars in the first place.

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