Allocation of Resources
Allocation of resources:
As human wants are fulfilled with goods or services there arises a problem of what to produce? how to produce? for whom to produce?. These three major questions deal with the allocation of resources. They are explained as follows:1) What to produce?: Human wants have to be fulfilled with the use of limited resources. Due to the scarcity of resources, this basic question of 'what to produce?' arises. This question deals with 2 questions; which goods should be produced at first, based on the priority, and how much of the goods should be produced based on the requirement. That means additional goods and consumer goods should be produced as for the country's necessity.
2) How to produce?: Following the solution to the problem of what to produce, there arises the next problem of how the goods are produced. There are two types of production technology:
a) labor-intensive b) capital intensive
In Labour Intensive Technique, labor plays a major role in production. Here labor is used more than capital. This technique creates more jobs and solves the problem of unemployment.
In Capital Intensive Technique, capital plays a major role, and in this technique, capital is used more than labor. The capital-intensive technique goes for a large volume of production.
Capital intensive Technology means employment of more capital and Labor intensive Technology means the use of more labor during production. So, they should be used according to the Nation's situation depending on which resources is in abundance.3) For whom to produce?: This question deals with for whom should be the commodities or services have to be allocated at first among the members of the society. This question deals with the issue of distribution. The two major choices may be distributed to consumers or distribution for profit. Priority goes according to the necessity and level of living standard.
All three questions are interrelated and dependent as well.
Fuller Utilization of Resources
Problems of Full employment
Full employment of resources is that situation where all the physical, natural, and human resources are used in the best possible manner. There is the problem of achieving full employment of resources. The problem with the economy is; How to use its available resources, make maximum output with minimum effort and minimum wastages. There shouldn't be misuse or wastage of productive resources since they are limited. Efficient allocation of resources refers to the optimum combination of factors of production.Full employment is related to the problem of economic efficiency. There shouldn't be misuse or leakages of productive resources available at our disposal. Since they are limited, the allocation of resources should be done efficiently. Efficient allocation of resources refers to the optimum combination of factors of production (factor inputs).
In order to fully utilize the resources, the production should be done at the efficient points of a Production Possibility curve (PPC). Productions done on the points of PPC or PPF indicate that the means and resources are used efficiently and fully. If the production activities are done inside the PPC, then it suggests inefficient or underutilization of available resources. This will lead to the wastage of resources.
The available resources are limited and scarce with respect to their demand and so, an economy cannot afford to waste them. Every economy attempts to utilize its scarce resources by using better technology and a combination of factors of production. So, to ensure full employment of resources, an economy needs to adopt better inputs and technology.
Growth of Resources
How to achieve Growth of Resources?
Every economy needs to know whether its productive capacity is increasing or not. In order to accelerate the pace of economic growth, underdeveloped countries need to grow their resources. However, it is a serious problem regarding the growth of resources. In order to grow the resources, an economy needs to invest in consumer goods and capital goods.
Similarly, there should be the investment in new technology, labor specialization, division of labor, employment of new production methods, increment in the labor force, and the discovery of new raw materials, etc in order to create the growth of resources.
Using a production possibility curve we can find whether there has been a growth of resources or not. If the production possibility curve shifts outward then it indicates that there has been the growth of resources. It suggests that the technological resources, capital, human, and other physical resources have increased which has led to an outward shift in PPC. However, it should also be considered that there should be the sustainable growth of resources. The resources are scarce and might be nonrenewable. So the resources should be increased by maintaining the carrying capacity of the environment.
