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AGGREGATE DEMAND DETERMINANT: A ceteris paribus factor that affects aggregate demand, but which is assumed constant when the aggregate demand curve is constructed. Changes in any of the aggregate demand determinants cause the aggregate demand curve to shift. While a wide variety of specific ceteris paribus factors can cause the aggregate demand curve to shift, it's usually most convenient to group them into the four, broad expenditure categories -- consumption, investment, government purchases, and net exports. The reason is that changes in these expenditures are the direct cause of shifts in the aggregate demand curve. If any determinant affects aggregate demand it MUST affect one of these four expenditures.

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ALLOCATION:

The process of distributing resources for the production of goods and services, and of distributing goods and services for the satisfaction of wants and needs and human consumption. This allocation process is an essential part of an economy's effort to address the problem of scarcity.
The allocation process involves decisions and choices made by consumers, producers, and governments. While producer and consumer allocation decisions are made primarily through voluntary market exchanges, government allocation decisions are involuntarily made in response to taxes and regulations.

A primary focus of allocation, from an economic perspective, is efficiency. Efficiency is achieved when the highest possible level of satisfaction is achieved from available resources. Economists like to see resources allocated in such a way that efficiency is achieved. An allocation is said to be efficient if available resources, goods, and services are distributed according to the economy's highest valued uses.

Consider the following examples of allocation choices.

  • Pollyanna Pumpernickel, a typical consumer, visits the local food market to purchase a loaf of rye bread, a jar of Dijon mustard, a package of Swiss cheese, and a few slices of honey-cured ham. She has decided to prepare a ham and Swiss on rye sandwich for lunch. She could have opted for a cheeseburger and French fries.

  • Mona Mallard, the President and CEO of Mona Mallard Duct Tape Industries, responds to a surge in the sales of duct tape by deciding to build a new, highly automated factory on the outskirts of Shady Valley. She could have kept pace with demand by increasing the workforce at her current, less automated factory.

  • Victor Thurgood, the honorable Mayor of Shady Valley, initiates a program in which one percent of all sales tax revenue is set aside, or earmarked, for the construction of jogging trails throughout Shady Valley. The city could have used that tax revenue to install a system of severe weather warning sirens.
Each choice affects the production, consumption, and distribution of goods and services.

<= AGGREGATE SUPPLY SHIFTSALLOCATION EFFECT =>


Recommended Citation:

ALLOCATION, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2020. [Accessed: November 25, 2020].


Check Out These Related Terms...

     | economic thinking | division of labor | specialization | distribution standards | ownership and control | incentive |


Or For A Little Background...

     | economics | dismal science | scarcity | first rule of scarcity | third rule of inequality | three questions of allocation | efficiency | satisfaction | production |


And For Further Study...

     | equity | consumer sovereignty | economy | government functions | political views | allocative efficiency | technical efficiency | production possibilities | ownership and control | property rights |


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