This problem refers to selection of technique Selection of techniques referred from this economic crisis are needed to be used for manufacturing of commodities and services. An item can be produced by using different manufacturing techniques. By the word ‘technique’, it has been meant that which of the particular combinations of inputs are needed to be used. Generally, techniques are classified as:
- Labour Intensive Techniques (LIT) - In Labour intensive technique, extra labour and minimum capital (in the form of machines, etc.) has been used.
- Capital Intensive Techniques (CIT) - In Capital intensive technique, it is complete reverse function of Labour Intensive Techniques (LIT), there is extra capital and minimum labour utilization.
For example,
- Textiles which can be produced either with the help of a lot of labour and a little capital or with the help of less labour and more capital.
- Factors’ availability and their relative and parallel prices help the economy in determining the technique which are needed to be used. The selection of every technique is done with a lively view to accomplish the objective of raising, the standard of living of people and also to supply employment to everybody.
- For example, in India, Labour Intensive Technique is favourable due to abundance of labour, whereas, countries like U.S.A., England, etc. prefer CIT due to lack of labour and abundance of capital.
- Combine factors of manufacture in such a way, so that maximum output has been produced at minimal cost, using least possible scarce resources.
