Write short notes on allocation of resources? |
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| Ans : Allocation of resources is related with the use of scarce resources to give maximum satisfaction. This means goods and services are produce in such a manner that the satisfaction derived from it is maximum. Hence, resources allocation is the problem which is related to the scarcity of resources and unlimited wants.
Resources are limited so we cannot produce everything that we want. Therefore we are forced to make a choice. When we make a choice, there is always an opportunity cost associated with it. Therefore limited resources most be used carefully.
In a free market and perfectly competitive economic, allocation of resources deals with the following fundamental problem of an economic. They are explained below:
(i) What to produce and how much to produce:- Since resources are limited, each economy has to decide what goods and services are to be produce and in what quantities. Production must meet maximum social need as it is the first priority. The problem of what to produce and how much to produce depends on the necessity of the citizens of the country.
(ii) How to produce:- The second concerned is related to the method of production. There are two method uses in production they are:
a) Labor intensive
b) Capital intensive
Under labor intensive technique, labor is used more than capital and when we use capital intensive technique, capital is used more than labor. The right decision depends on the current state of the economy.
(iii) For whom to produce:- The economy has to decide how goods and services are distributed among different income groups in the society. Before producing goods and services, the targeted customer group should be identifying. Whether the production is for low middle class, middle class or high middle class family.
(iv) Balance in economy:- Another purpose of resources allocation is the maintenance of balance among different sectors of an economy. The balance between rural and urban sector, between which consumption and export promotion, between consumer goods and capital goods etc. are healthy sign of an economy. Investment in all these sector are very important.
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