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7.3 Efficiency and Market Failure
Homearrow_rightRevision Notes arrow_right A Level arrow_right The Price System And The Microeconomy arrow_right Efficiency And Market Failure
7.3.1 Definitions of productive efficiency and allocative efficiency
Definition: Productive efficiency: output is produced at the lowest possible average cost, using the minimum resources. For the economy, it means producing on the PPC.
Definition: Allocative efficiency: resources are allocated to produce the combination of goods and services that consumers value most; no reallocation could make society better off. The value consumers place on the last unit equals its cost.
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