Resource allocation
What Resource allocation means in Economics A-Level, as defined for AQA.
Definitions of Resource allocation
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Reference: AQA
A misallocation means the combination of goods produced does not maximise society's overall utility, and resources could be rearranged to make society better off without making anyone worse off.
Optimal allocation is not guaranteed where negative externalities exist, since the perfectly competitive free market will overproduce, leading to misallocation.
The determination of how scarce resources are distributed among competing options, such as whether a government funds new hospitals or high-speed rail.
The way the price mechanism distributes resources, which fails to be efficient when economic agents lack the data required for rational decisions.
The allocation that a chosen method of intervention, such as indirect taxation or subsidies, theoretically corrects when it is misallocated.
The outcome judged against perfect competition to establish the extent to which a misallocation of resources occurs in real world markets.
Topics that use Resource allocation
- Government intervention in markets (AQA A-Level)
- Market imperfections (AQA A-Level)
- Perfect competition (AQA A-Level)
- The meaning of market failure (AQA A-Level)
- The nature and purpose of economic activity (AQA A-Level)
Related terms
- Externalities
- Allocative efficiency
- Economic systems
- Labour markets
- Market failure
- Average revenue
- Barriers to entry
- Dynamic adjustment
Using Resource allocation in the exam
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