Question

Labour-intensive technique is useful for

• A. Developing countries
• B. Developed countries
• C. Backward economies
• D. None of these

Hint:

Remember the basic economic principle: Use the factor of production that is abundant and cheap. For developing countries, this is labour. For developed countries, it is capital. This will help you answer questions related to production techniques.

Answer 1

The Correct Option is A

Step 1: Understanding the Question:
The question asks to identify the type of economies for which labour-intensive production techniques are most suitable.
Step 2: Key Concept:
A labour-intensive technique is a method of production that uses a higher proportion of human labour relative to capital (machinery and technology). The suitability of a technique depends on the factor endowments of an economy, i.e., the relative abundance of its factors of production (labour and capital).
Step 3: Detailed Explanation:
- Developing countries and backward economies are typically characterized by a large population and an abundance of labour. Capital, on the other hand, is often scarce and expensive.
- Using labour-intensive techniques in such economies is beneficial because it helps in utilizing the abundant labour force, which in turn generates employment and reduces unemployment. It is a cost-effective method when labour is cheap.
- Developed countries are generally capital-abundant and have higher labour costs. Therefore, they tend to favour capital-intensive techniques to maximize efficiency and reduce costs.
- Both (A) and (C) are technically correct, but 'Developing countries' is the more standard and encompassing term used in modern economics.
Step 4: Final Answer
Based on the principle of factor endowment, labour-intensive techniques are most useful for developing countries that have an abundance of labour and a scarcity of capital.