Monday, January 14, 2013

Allocation

How goods and services are distributed among those who want and need them is called allocation.  Here is the AmosWeb.com definition:

The process of distributing resources for the production of goods and services, and of distributing goods and services for the satisfaction of wants and needs and human consumption. This allocation process is an essential part of an economy's effort to address the problem of scarcity.
How are resources distributed?  The market provides the goods and services, but consumers determine which ones are consumed by their wants and needs, tastes and preferences, their incomes, and expectations of future prices.  We know that inequality will result because markets don't always function perfectly.

In Tyranny of the Market, the author makes the point that fixed costs often determine the distribution of goods.  Since wants are unlimited and resources are limited, it seems to me that there will never be equality of distribution.  I'm not sure that equal distribution should be a goal, but the functioning of markets should be.

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