Resource allocation is the process in which a company decides where to allocate scarce resources for the production of goods or services., production factors are scarce and are considered essential for all businesses. There are four production factors, land, labour, capital, and entrepreneurship. These inputs are essential for producing output., In a free market economy, resources are allocated through the interaction of free and self-directed market forces. This means that what to produce is determined consumers, how to produce is determined by producers, and who gets the products depends upon the purchasing power of consumers., In the factor market, an increase in supply of labour and demand for labour leads to an increase in Q of workers and wages staying at W1., In the product market, an increase in demand can lead to an increase in the price of the product..

Resource Allocation

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