Allocative efficiency
What Allocative efficiency means in Economics B A-Level, as defined for Pearson Edexcel.
Definitions of Allocative efficiency
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Reference: Pearson Edexcel
Achieved when a firm's structure of production perfectly matches the pattern of consumer preferences, meaning resources are used to produce exactly what people want.
Occurs when resources are distributed to maximise consumer satisfaction, meaning the mix of goods produced matches what society desires most.
Achieved when the additional benefit to society of consuming a good matches the extra cost of producing it.
Topics that use Allocative efficiency
- Productive and allocative efficiency (Pearson Edexcel A-Level)
Related terms
- Consumer preferences
- Labour productivity
- Market interrelationships
- Market orientation
- Opportunity cost
- Productive efficiency
- Trade-offs
- Human capital investment
Using Allocative efficiency in the exam
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