Competitive Markets are the best means of allocating scarce resources

“Competitive markets, free from government intervention, are the best means of allocating a society’s scarce resources amongst its members.”

The dilemma of how best to allocate a society’s scarce resources amongst its population has been avidly debated by economists and policy makers over time. It can be argued that competitive markets, free from government intervention facilitate the most effective allocation of resources. However through an examination of the costs and benefits of this system it can be determined that a ‘mixed economy’ with some government intervention will produce the most desirable outcomes. Competitive markets involve a voluntary exchange of goods and services that benefits all participants of the transaction and traditionally impose few restrictions on how goods and services will be produced and how the factors of production can be employed1. Furthermore the abundance of firms in such systems places competitive pressure on businesses to lower prices, improve the quality of output and increase sales for the benefit of consumers.

An allocation of resources refers to the way a particular market decides what will be

produced, how it will be produced as well as who will

Bibliography:  (2007),  ‘Arguing  (2009),    A,  (1990),  (1995),  Principles