Allocation of Scarce Resources in a Market Mechanism Assignment

Allocation of Scarce Resources in a Market Mechanism - Assignment Example Hence the need for an efficient allocation of the existing resource base through prioritization of wants is being felt increasingly. Effective allocation of the scarce resource base is the only way through which a country can satisfy the demands of its growing population and work towards profitability. To counter the system of effective allocation of the existing resource base the economies of the world are generally faced by three fundamental questions. Firstly, the economy needs to consider the nature and the pattern of the goods and services that need to be produced to meet the needs and demands of the growing population. Secondly, the economy needs to identify the most effective way through which the goods and services can be produced to justify the use of depleting resource base. Thirdly, the economy must understand the needs of the target population who will eventually consume the goods and services produced. (Riley, 2006; Economic Systems, 2010). To this end, it is found that allocation of the scarce and limited resource base in an economy driven by ‘market mechanism’ is conditioned on the price quotes obtained through auctions or bids. The resources of the economy are transferred to private hands through the system of bids and auctions. The observation made in this regard shows that the government of different countries operating in a market mechanism has made the private sector get a license in relation to oil exploration and land property rights. The private system in the economy owing to the above fact has emerged as key players in areas like broadcasting, education, housing and oil exploration. Here, it must be noted that allocation of the limited resource base through market mechanism depends on the purchaser’s desire to pay for the same. Information about the highest price that can be paid by the purchasers are gathered through the bidding system and the decision is taken henceforth on the acquired data.