Answer to Question #323039 in Microeconomics for Tluanga

Question

What is the rationale behind the rationing system for allocation of scarce resources?

Answer 1

Rationing is a government policy that includes the planned and restrictive allocation of scarce resources and consumer goods. It is mainly carried out in case of famine, war, or any other national tragedy. Various types of rationing include point rationing, rationing by value, rationing by quantity, and informal rationing. Rationing is inevitable since need is boundless while resources are not. The rationale behind rationing is to provide governments with ways to cap prices, regulate supply, and constrain demand. Additionally, banks employ credit rationing to regulate lending beyond the bank's monetary base.