What is resource allocation?

Allocation of resources, apportionment of productive assets among different uses. Resource allocation arises as an issue because the resources of a society are in limited supply, whereas human wants are usually unlimited, and because any given resource can have many alternative uses.

Why do economists say the allocation of resources is efficient?

When the net benefits of all economic activities are maximized, economists say the allocation of resources is efficient. This concept of efficiency is broader than the notion of efficient production that we encountered when discussing the production possibilities curve.

How do supply and demand affect resource allocation in a market economy?

The fundamental economic theory, supply and demand, plays a central role in resource allocation within a market economy. Demand represents the quantity of a good or service desired by buyers, while supply symbolizes the amount that producers are willing to provide at different prices.