- What to produce?
The first concered is rated with What to produce? How much to produce? Because resources are scarce production of all goods and services needed by a society are beyond its capacity. It is simply not possible for any economy no how develop it might be. So, it has to select a set among various alternatives production must meet the maximum social need. The first priority goes to the basic needs. However, production is guided by profit and profit knows social justice. An economy should follow social efficiency while recollectiong resources. The social norms and values should guide to maximize social satisfaction so allocation is best which satisfies the most. The problem of what to produce and how much to produce depends on the necessity of the citizens of the country.
- How much to produce?
The second question is concerned with the method of production. In some cases, labor may play a major role. It is called labor intensive technology. In others, capital may play a major role. It is called capital intensive. Labor intensive methods creats more jobs favouring more employment. It helps in mitigating unemployment problem. Capital intensive production goes for large volume of production. It commends rapid growth rate. The right decision on the current state of the economy.
- For whom to produce?
Production for masses or production for profit are two major choices that every economy has to decide. Basic needs of common people cannot be ignored. Of course, the priority goes to wage goods production. In the quality is determined by the level of living standard, which is the outcome of the development level of the economy. Therefore, as the development level of goods, higher production of superior goods proceeds towards fetching super profits. This issue is also related with maintaining social justice. Meeting the basic requirements of all segments of population is the main criteria of resources allocation.
- Promotion of Efficiency in Economy
How to run an economy efficiently is the first concern of resource allocation. Economics efficiency is measured in additional welfare achieved without worsening any result. It means that new reallocation of resource must not only be able to maintain the existing level but also achieving new heights. Alternatively, reallocation may be profitable somewhere but incurring losses elsewhere. The main objective is to increase aggregate profitability of the economy.
- Balance in Economy
Another purpose of resource allocation is the maintainance of balance among different sectors of an economy. The balance between rural and urban sectors, between home consumption and export promotion, between consumer goods and capital goods and regional balance are the healthy signs of an economy. Investment in these different sectors are very important. How much to invest in what sector? This is the major question, which is studied in this topic.