Why isn't Minecraft using the full amount of RAM?
No.
The allocated memory will be used as it is needed. The allocation simply determines the maximum. However, if Minecraft does not need that much memory, it'll just not use that much.
If you load up a typical Minecraft game, it'll only load up a single chunk, and as you move away from the loaded chunk, it'll unload unused areas.
If you are having an actual problem, you should ask about the problem itself instead of thinking the problem is due to memory allocation.
Check if your integrated graphics are being used for Minecraft.
Right click on the desktop and open nvidia control panel (or you can go find the nvidia icon on the taskbar)
Navigate to "manage 3D settings" drop down under 3D settings.
Under the global settings tab, underneath preferred graphics processor, change it from auto detect to high performance graphics processor.
This will make your default graphics processor your GTX 980m.
For checking your power options:
Search for "Power Options" in the search bar or search feature (Windows 10/8). Otherwise, navigate to it through the control panel.
Click Change plan settings next to the power plan you wish to use.
Click Change advanced power settings.
Choose your desired settings then click Apply.
Click OK to save your changes.
I recommend using balanced, as this will keep the CPU from running full speed when it doesn't need to (like when the computer is idling), but will speed up the CPU when it's under load, such as playing a game. I belive there is one set of power rules for when the laptop is plugged in and when it is running on the battery, so be sure to check both. Note thay when you are running on battery power, using the high performance option will drastically lower your battery charge time.
Hopefully this solves your lag problems. When hardware is being limited due to being on a low power mode, the symptoms you describe can occur. A GTX 980m should have no problem running Minecraft.