Under resource allocation or factor allocation refers to the allocation and distribution of scarce resources such as labor , capital , soil and raw materials for production of goods or services . Be distinguished from the issue of allocation is the question of the distribution ( distribution ) of goods produced on individuals or social groups (see also distribution conflict ).
Every economy has a certain set of factors of production. These limited factors contrast with unlimited needs of individuals. This gives rise to the question of which needs should be satisfied with the available resources. This is the allocation problem.
Solutions to the allocation problem are so-called Pareto-efficient allocations. They have the quality that it is not possible to make someone better without making someone else worse off.
Methods of resource allocation
"A market is a process in which, through the interaction of buyers and sellers of a good, decisions are made about its price and quantity."
The market mechanism offers numerous advantages over other coordination mechanisms. For example, a functioning market mechanism leads to allocation efficiency. This means that the customers get the goods they want and can pay for. Here, the allocation efficiency is given in that the marginal costs of production correspond to the marginal utility of the consumer. A different quantity of goods would now reduce welfare, since then the marginal costs no longer correspond to the marginal utility and thus lead to a new equilibrium. Furthermore, the market mechanism leads, among other things, to production efficiency, has a motivational function and promotes technical progress . However, these advantages can only come into play if there is functioning competition and the market can optimally satisfy all needs. Failure to do so can lead to market failure . The market efficiency hypothesis of capital markets is a financial equivalent.
Here the state intervenes in the regulation of the market in order to guarantee a politically wanted distribution. This is expressed in decentralized and centralized planning of the processes. The decentralized orders are generally considered to be market economies and the central systems of order as central economies .
In capitalist market economies, the scarcity is indicated by market prices. These market prices then ultimately also regulate the market. In order for the markets to function as well as possible, the state must find Pareto-optimal quantities here . A Pareto optimum is a state in which it is not possible to make one individual better off without making another individual worse off at the same time. The problem with this is that while it may be very efficient, it is not necessarily just and fair . Karl Marx , for example, provided approaches to the central solution of the allocation problem . It is assumed here that the solution of the allocation problem is closely related to the solution of the property problem. In doing so, Marx strived for a 'systematic, conscious organization of social production'. But this is only possible through a centrally planned and controlled market economy. According to his theory, the systematic organization of production puts an end to the struggle of the individual for his or her existence, thereby making it possible for a free, competitive community to be formed in which social security and social peace can be realized. The resources are distributed by means of planned quantity balances for goods. Here the prices are set by the state and the means of production of the national economy are nationalized in contrast to the market economy. The price mechanism as a scarcity indicator is rejected because it only takes into account purchasing power demand and not the much higher real needs of the population. In socialist market economies, on the other hand, both planned and market-based market elements are combined. Here the prices result from both market prices and government regulations.
|Central economy||Socialist market economy||Capitalist market economy|
|price||state fixed prices||State fixed prices and market prices||Market prices|
|means of production||Means of production nationalized||Associated ownership of the means of production||Private ownership of the means of production|
|Formal goal||Principle of plan fulfillment||Income principle or profit principle||Profit principle|
The resource allocation of two economic sectors is determined using the box diagram ( Edgeworth box ). The same production factors are required to manufacture goods from both sectors.
To determine the resource allocation, the goods prices (here: prices for automobiles and cosmetics) and the stock of resources (here: labor and land) must first be given.
The abscissa shows the total supply of labor, the vertical axis the total supply of land. The blue line reflects the soil-labor ratio in the automotive industry, the red line that of the cosmetics industry.
At the point where both soil-labor relationships (red and blue line) intersect, the efficient allocation of resources for determining the (resource-) optimal production quantities of the two goods lies.
If the demand for cosmetics increases, the price of this good will rise. Producers will produce and offer more in this market. As a result, more production factors are in demand for the manufacture of cosmetic articles. Here it becomes clear that the price directs the distribution of the productive forces on the production of goods.
When the labor and land use in the automotive industry decreases, the supply of these resources in the cosmetics industry increases. The production factors that are no longer used in the automotive industry are directed into cosmetics production. This means that one is moving on the transformation curve in the direction of the cosmetics industry, since the resource can be best used here. This effect, the so-called Rybczynski effect , is seen as a possible explanation for an economy's foreign trade .
The production of cosmetics increases disproportionately to the increase in the supply of land. An increased supply of land lowers the production volume of the labor-intensive good at constant prices. This shows that the allocation of resources determines the output of the economy as a whole.
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