Allocation[/caption]An allocation is the distribution of the available production factors in the national economy to the different possibilities of use.
Available resources must, therefore, be used effectively in order to save costs and, on the other hand, save time or protect the environment. The difficulty, however, is to find the optimal allocation.
This is the best possible use of the production factors that are available. The allocation describes both the process of optimally utilizing and allocating resources as well as the respective state. In addition, the allocation is usually controlled by markets that are adaptable on the one hand and flexible on the other.
Allocation problem
In the case of allocation, a primary goal is to use existing resources efficiently. The reason: All resources, whether employees or raw materials, cost money. The more efficient and advantageous these are used, the more economically an economy can ultimately produce. As a result of such an optimal allocation, the economy remains competitive in the long term.
In addition, many resources are limited, so they are not available in any amount. This also requires the use of an optimal allocation. This "distribution problem" is also referred to as an "allocation problem" in the technical language. Scarce resources are distributed here in order to achieve an optimal welfare. The production factors or resources that are scarce are primarily raw materials, labor, and capital.
Methods of allocation
In principle, differentiation is made between two different methods. The first possibility is that the distribution of resources is taken over by the respective markets themselves. But this usually only works in theory, if one assumes a complete market. The reality looks rather different and therefore makes the intervention of the state necessary.
Method 1: Market Mechanism
This methodology of the market mechanism, which is oriented towards the theory, means that the markets distribute the resources themselves. Since this is a theoretical optimum, we benefit from various advantages. In this way, for example, buyers get exactly the resources they need. In addition, the market mechanism can also promote technical progress. Finally, demanders themselves determine the extent to which they use which resources. Accordingly, all market participants are flexible.
Method 2: Intervention by the State
As a rule, state intervention is necessary to ensure a functioning market. The primary objective of the state is to distribute the existing production factors fairly. This state regulation differs in many respects from the market mechanism. Thus, for example, means of production are nationalized and prices are also fixed by the state. The available resources are distributed through "commodity-economic plan balances". This means that the state is quasi-required to specify which resources are being given.
And again briefly summarized:
- Allocation is the distribution of existing resources to different usage possibilities
- The aim is to achieve optimal allocation
- Allocation is important in the following scarce resources: labor, capital, land, raw materials
- The allocation problem or distribution problem also describes the difficulty of efficient resource utilization
- In the market mechanism, a distribution of resources takes place through the market itself
- Regarding state regulation, the state sets the framework conditions
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