In October of 1991 I had the opportunity to travel to the \"Soviet Union\".At th

Question

In October of 1991 I had the opportunity to travel to the "Soviet Union".At that time,the Soviet Union was in political and economic turmoil.The "command economy" was failing and what was the Soviet Union was reverting to individual entities.Foodand consumer goods were in short supply.After fifty years of "command" decisions, individual and companies were trying to come to grips with the elementary aspects of the "market."After addressing a groupofbusiness executives, where I talked about the concept of "consumer choices", I was asked the following question by the director of a manufacturing company.He said, "Help me understand something.You have talked about products and choices.Tell me how many kinds of toothpaste are available in your country."I responded that there were many different brands of toothpaste.Somebrands havespecial flavors, some have special additives and some come in avariety of sizes and shapes.Depending on the brand, the size, the additive etc., they are sold for different prices.The director said, in all seriousness, "Why?Toothpaste is toothpaste, you clean your teeth with it, youonly need one choice." Hum. . .good point.What would you have said to himif you were in the conversation?Why are there different brands, flavors etc.Wouldn't it be more efficient if there werejust one choice and one price?Wouldn't that serve society better?Answer the Directors question.Use concepts that we have studied so far in the course. Whateverpoints you make in answering the question, be sure to justify the positions that you take.Although the question was about a specific product, you should generalize to the economy as a whole.

Explanation / Answer

As per economics the choices depends upon how an individual wants to use of the limited resources. It all depends whether the individual makes an irrational choice or rational choice. Different goods are produced to satisfy the same need because of different wants of individual.

According to the given question the purpose of the toothpaste is to clean teeth but with different varieties available with different flavours and/or additives the wants of different people are satisfied. If only one type of toothpaste would have been produced then it would difinitely lead to greater efficiency but at the cost of not satisfying wants of many individuals.

Whenever a good or service needs to be produced then the three questions must be kept in mind while answering the questions of choice:

1) What to produce?

2) How should such ood and/or services be produced?

3) For whom to produce?

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