Question

Explain the problem of distribution.

Answer 1

The problem of distribution refers to deciding how the total output of goods and services should be shared among individuals and factors of production. It has two aspects: (i) functional distribution, which deals with how income is shared among landowners, workers, capitalists, and entrepreneurs; and (ii) personal distribution, which addresses inequality in income among individuals or households. Essentially, it answers the question of “for whom to produce” and ensures that each productive factor's urgent wants are fulfilled to the maximum extent possible.