Economic scarcity necessitates resource allocation from "summary" of The Making of Economic Society by Robert L. Heilbroner,William Milberg
Economic scarcity is an undeniable reality in the world we live in. It is the fundamental problem facing every society, irrespective of its economic system. The fact that resources are limited while human wants are unlimited gives rise to the need for resource allocation. In the absence of scarcity, there would be no need to make choices about how to utilize resources. However, scarcity forces individuals, firms, and governments to make decisions about how to allocate resources efficiently. Resource allocation is the process of distributing scarce resources among competing ends. This involves making choices about what goods and services to produce, how to produce them, and for whom they should be produced. In other words, resource allocation involves deciding how to best use limited resources to satisfy the unlimited wants of society. In a market economy, resource allocation is primarily determined by the forces of supply and demand. When resources are scarce, individuals and firms must compete for them, driving up prices. This, in turn, signals to producers that there is a high demand for certain goods and services, leading them to allocate more resources to producing those items. On the other hand, in a centrally planned economy, resource allocation is determined by government planners. They decide how resources should be allocated based on predetermined goals and objectives. While this system can be efficient in some respects, it is often criticized for its lack of flexibility and responsiveness to changing market conditions. Regardless of the economic system in place, the fact remains that economic scarcity necessitates resource allocation. Without scarcity, there would be no need to make choices about how to best use resources. It is this fundamental problem that lies at the heart of economics and drives individuals, firms, and governments to make decisions about how to allocate scarce resources efficiently.
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