1.1.4—Resource allocation questions

Resource allocation is the process of deciding which goods and services are produced, which production methods use scarce inputs, and who receives the resulting output.

A market may coordinate choices through prices and incentives; governments may allocate through rules, taxes, public provision or planning. Each method involves trade-offs and distributional consequences.

A city deciding between more buses and more roads is answering what to produce and how to use land, labour and capital; fares and access determine for whom the service is available.

Efficiency and fairness are different allocation questions: an allocation can maximise output while leaving access unequal.