What to produce is the central problem of the economy; it’s related to the allocation of resources.
This is the first basic problem of allocating resources among different alternative uses. This is also called the problem of resource allocation.
It is related to the selection of goods, as all goods cannot be produced because of limited resources. Whether to produce more food, clothing, housing or luxury, whether to have more consumer goods or to have capital goods
It is a two-fold decision:
Which goods and services are to be produced, e.g., consumer goods or capital goods, wartime goods etc.
Quantity of goods and service; after a decision has been taken on a type of goods, quantities of these goods should also be decided.
Final Answer:
What to produce is the central problem of the economy; it’s related to the allocation of resources where goods to be selected for production goods, whether to have consumer goods or to have capital goods.