Allocation of resources

Allocation of resources:

As human wants are fulfilled with goods or services there arises a problem of what to produce? how to produce? for whom to produce?. These three major questions deal with the allocation of resources. They are explained as follows:

1) What to produce?:
Human wants have to be fulfilled with the use of limited resources. Due to the scarcity of resources, this basic question of 'what to produce?' arises. This question deals with 2 questions; which goods should be produced at first, based on the priority, and how much of the goods should be produced based on the requirement. That means additional goods and consumer goods should be produced as for the country's necessity.

2) How to produce?:
Following the solution to the problem of what to produce, there arises the next problem of how the goods are produced. There are two types of production technology:

a) labor-intensive
b) capital intensive

In Labour Intensive Technique, labor plays a major role in production. Here labor is used more than capital. This technique creates more jobs and solves the problem of unemployment.

In Capital Intensive Technique, capital plays a major role, and in this technique, capital is used more than labor. The capital-intensive technique goes for a large volume of production.

Capital intensive Technology means employment of more capital and Labor intensive Technology means the use of more labor during production. So, they should be used according to the Nation's situation depending on which resources is in abundance.

3) For whom to produce?:
This question deals with for whom should be the commodities or services have to be allocated at first among the members of the society. This question deals with the issue of distribution. The two major choices may be distributed to consumers or distribution for profit. Priority goes according to the necessity and level of living standard.

All three questions are interrelated and dependent as well.