Resource allocation plays a vital role in solving economic optimization problems. The productive resources like land, labor, capital, equipment, technology, etc. are inadequately available. Due to the inadequate availability of resources, the issue of resource allocation becomes serious. 

Resource allocation can be defined as the distribution of resources (human, financial, and natural resources) for various activities and geographies. For example, distribution of revenue resources by the central government to the provincial governments of the nation.  Thus, resource allocation for a particular time is concerned with two things. The first one is natural distribution. It means the occurrence of natural resources with reference to geographical location. The second one is the distribution of the stock of available resources among different activities, locations, and so on.

The allocation of resources is in fact is the problem of allocation of resources. This problem arises due to the limited availability of the resources or due to scarcity of the resources. Thus, solving this problem ensures the optimal utilization of limited productive resources and fulfillment of optimization objectives in the most efficient way. Therefore, allocation of resources deals with the use of scarce resources to given maximum possible utility. The techniques or ways of distribution or allocation of resources are based on the economic system followed by the nation.

Resource allocation involves managing available resources in a variety of forms to make the best use of them. Distribution of resources more precisely shows matching conflicting/competing wants and priorities and finalizing the most effective action that can maximize the benefit expected from effective use of limited resources and gain the best rewards.

To allocate resources to their best use, the first thing needed is setting the goals and identifying priorities of existence. Those goals and priorities give the user different ways and ideas of distribution of resources and through which they can get their objective accomplished efficiently.  

Uneven and wasteful distribution of scarce resources is a most disrespectful thing in economic analysis. The problems like inequality, poverty, unemployment, etc. are also associated with the problem of unequal allocation of resources. Therefore, through a proper allocation of resources, such problems are needed to address to turn the country into a developed nation from an underdeveloped and developing nation.

The objectives of the issue of allocation of resources are not solved only by distributing resources equally or most efficiently as it requires their proper utilization to obtain the efficient outcome from the distribution along with even distribution. Thus, the allocation of resources practically deals with the following issues.

What to produce?

As the supply of resources is not unlimited thus producing all the goods that society needs are impossible, Thus, the economy needs to decide the range and the number of products to produce. Different goods like consumer goods, capital goods, etc. need to be identified to get the answer to the issue of what and how much to produce.

How to produce?

Identification of techniques of production is also related to the allocative function of an economy. Generally, two popular techniques are there as labor-intensive and capital-intensive techniques of production. The economy needs to choose an appropriate method of production to achieve its objectives.

For whom to produce?

The problem is related to the distribution of produced goods among different people living in the society. Priority goes based on the different types of goods that the economy is producing.

The problem of full employment/how to attain full employment?

Making fuller utilization of resources possible is the next problem associated with the allocation of resources. Resources should be fully used without any waste and misuse. The optimal combination of resources may give the best potential result and that can be inferred from the fuller utilization of resources.

How to achieve economic growth? Are the resources economically used?

Increasing the production capacity of the economy from existing resources will ensure economic growth from the allocation of resources. There may be a need for different factors to expand the productive capacity and thereby increase economic growth.

Resources are distributed in different ways in different economic systems and thus economic problems of resource allocation in a planned, market, and mixed economies are solved in different ways.