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In: Economics

In economics, the intertemporal allocation of a scarce, depletable resource across generations is efficient, but not...

In economics, the intertemporal allocation of a scarce, depletable resource across generations is efficient, but not necessarily fair . give some example and explain.

Solutions

Expert Solution

Based on intertemporal data of resources allocation like crude oil which is scarce and depletable and non renewable we see that the allocation is efficient based on demand and quantity required for each nation however is not fairly allocated.

As major nations like China and India dominate crude oil imports the sizeable prpduction gets allocated in these countries and supply gluts get created which pushes the prices so high that poor nation with low forex reserves and depreciating currency cannot afford large quantities of crude oil import. Subsequently the demand rises there and so does prices causing inflation to boom making this allocation imperfect and unfair.

Thus IMF amd World Bank and OPEC and Non OPEC countries must collaborate to form weighted average approach in allocation of crude oil through financial support and aid.

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