Remember that resources (land, labor, capital, entrepreneurship) are scarce or limited. We cannot have everything; we must make choices.
How to produce?
If labor is cheap and capital is expensive, a labor-intensive technique would be considered and vice-versa. The prices of labor and capital are determined by the demand for and supply of labor and capital respectively.
For whom to produce?
Goods are produced for those people who have the paying capacity. The capacity of people to pay for goods depends upon their level of income.