Question

How is the problem of allocating limited supply tackled?

Answer 1

Some of the possible methods of allocation are:

1. First-come, First-served: In this approach, goods are provided to buyers in the order they arrive. Customers line up, and the product is sold until the stock runs out. This method has been used in India during shortages of essential items like kerosene and petrol. However, it leads to long queues and time wastage. People arriving early may get the product, while those at the end may return empty-handed.
2. Allocation by Sellers’ Preferences: In this method, the shopkeepers decide who will receive the limited stock. They may choose to supply goods only to regular or known customers. This method can result in a biased distribution and may not be fair to all consumers.
3. Rationing: This is the most common method. The government issues ration cards or coupons to families, allowing them to buy a fixed quantity of essential goods at a controlled price. For example, in India, BPL (Below Poverty Line) families receive grains like rice and wheat through ration cards at subsidized prices set by the government.