Resources allocation

The allocation of resources to satisfy human wants is often called 'the central economics problem'.The problem of the following three feature of the society.

1. Human wants are unlimited.
2. The resources,land,labour and capital that are available to produce goods and service to satisfy these wants are limited.
3. Most resources have alternative used.For example,land can be used to grow rice,or wheat,or as a site for factory or to build a house or to make a playground.

The first two characterised given rise to the basic economics problem of scarcity.These are not enough resources to satisfy all of human wants.Scarcity together with the third characteristic gives rise to the basic need foe choice. Choice implies how the resources are to be allocated among their competitive uses.For example,how much of labour should go into producing wheat,how much to biscuit,how much to music band and how much to road construction.Hence,as opined by R.G.Lipsey and C.Harbour;"The Central economics problem is often defined as the allocation of scarcity resources among competitive uses foe the satisfaction of consumers' wants."
Tn the most important function of the economics system is resources allocation.According to K.J. Cohen and R.M. Cyert-"An economics resources is ether a goods or services which is valued by by consume rd for its own sake or an element which is used in producing goods or services for consumers." Almost all economics resources are scares.Hence,each society must devise some system for allocated them.
In a free economy,which is called perfectly competitive model,the scare economic resources are allocated in following ways:

1. Determining what will be produced :The first allocated function is to decide what goods and service will be produced.It is because resources are scarce.In perfectly competitive economy,The consumers ultimately decided what will be produced in what quantities.The pricing process helps consumers to indicated their preference for goods and services.The more consumers want some product,the more they will spend on it.The price they will be willing to pay will be high.The price system reflects the consumer preference.It will tell firms which goods and services are more profitable to produce.
2. Determining how it will be produced :The second allocate function.It is to determine how goods and service will be productive.It is because there are several different ways of producing a product.The objective of a firm is to maximise the profits.The profit is the different between total revenue and total cost.Hence,the firms will try to minimise total cost in order to maximise profits.This determine He fact ore of production that each firm will use producing its output.
3. Determines whom to produce :The third function is to decide who will get the goods and services,which are produced.It is because economics resources are scarce.Most consumer earn their income primarily by selling productive resources to businessman.The composition forces the businessman to pay each resources owner about what he contributes to the revenue of the firm.
4. Decided how to provided for the growth of a nation :The fourth function is to decided how much of the resources to devote to future growth and how to satisfy current consumption desired.An economics can grow only by using some of its productive resources to increase its capacity to meet future need.Only by curtailing current consumption,higher standard of living can be provide to future generation.