Resource allocation referrers to how we use or utilise our scarce resources. A society will try to allocate its resources in the most efficient and effective way. To do so it will try to use its resources so that the satisfactions of wants are increased to the maximum. A society won’t just have to decide what to produce, but also how to produce and for whom to produce. A problem comes to people’s notice where wants are unlimited and resources are limited, because we can’t have everything we want, and so we have to choose between competing wants. This is called the Problem of relative scarcity, or economic problem. A society will have to decide what to produce and for whom to produce, if it wants to provide a good business and attract buyers.
We simply need an economy to run the whole country. We need an economic system to live, buy food, travel, pay rent or do anything else; it is a particular way of providing the needs of its people. What happens in a country can affect the rest of the world. People in some parts of the world are too poor to support themselves and have to be lent money by richer countries. The poor country is then in danger of being run by the rich country. If the Australian dollar is suddenly worth less overseas than it was, then our goods will cost less for other countries to buy and our exports will go up. Goods from overseas will be more expensive for us and our imports will go down. Australia is a capitalist country. This means that aiming for profits from how things are made, bought and sold is the main way prices are set, people are paid and money is made. Decisions about how much to produce, how things should be produced and for whom they are being produced need to be made all the time. In Australia, the government through the budget and its regulations controls a great deal of these things.
The Australian economy includes the private ownership of resources, the pursuit of self-interest, competition amongst businesses and the desire of business to maximise profit by being a stronger competitor. These are also included in the Market economy. Competition between businesses is important because it is a very good way of causing the efficient allocation of scarce resources. Businesses will try to compete with each other in order to attract buyers; they do this by producing what people want and by improving the range of quality and characteristics of what they produce. In the Market economy, business aims to maximise profit by maximising the satisfaction of households. Market economies contrast with command or planned economies because governments and their agencies make decisions relating to resource allocation. Government planners tell managers what to produce, whom to sell it to, and what price to charge.
All societies have their own economic system. Ours in particular is highly industrialized, and manufactured goods cover for most of the gross domestic product. Australia has valuable mineral resources, including coal, iron, bauxite, copper, tin, lead, zinc, and uranium; the country also raises of sheep and cattle. Australia maintains a favourable balance of trade, and runs very effective economy.
Robert Struk
