resource allocation


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resource allocation

see MARKET SYSTEM, ALLOCATION.

resource allocation

the allocation of an economy's FACTORS OF PRODUCTION between alternative uses in line with patterns of consumer demand (which in turn reflect a given size and distribution of national income). Resources are optimally allocated when the proportions in which factor inputs are combined to produce GOODS and SERVICES reflect their relative costs so as to minimize costs of production and when the output of goods and services fully reflects the distribution of consumer preferences as between those goods and services. (See PARETO OPTIMALITY.)

More specifically, resources are optimally allocated when in each market the price paid for the good or service fully reflects the lowest economic cost of supplying it. See ALLOCATIVE EFFICIENCY, PRODUCTIVE EFFICIENCY, DISTRIBUTIVE EFFICIENCY, MOBILITY, PRICE SYSTEM, THEORY OF MARKETS, PRODUCTION POSSIBILITY BOUNDARY.

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