Sunday, November 4, 2012

Resource Allocation in Market, Command and Mixed economy.

Resource allocation
Resource allocation is defined as the way in which limited resources are distributed to produce goods and services.

Resource allocation in free market economy
In free market economy, resources are allocated according to the market forces of demand and supply. Here, resource allocation is determined by consumers' demand and producers' supply. Demand is the most influential factor.

Resource allocation in command economy
In command or planned economy resources are allocated by the government through centralized planning. The central planning Authority decides what to produce, how to produce and for whom to produce.

Resource allocation in mixed economy
In a mixed economy, both private and public sector play an important role in economy. Private sector allocates resources according to the demand and supply. Public sector allocates resources through centralized planning.

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