Allocative efficiency
What Allocative efficiency means in Economics A-Level, as defined for AQA.
Definitions of Allocative efficiency
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Reference: AQA
Arises in the short run where price equals marginal cost, maximising consumer surplus and ensuring resources follow immediate consumer preferences.
The optimal distribution of resources where societal welfare is maximised, occurring where price equals marginal cost.
The ideal outcome against which the flawed outcomes generated by real-world market imperfections are distinguished.
The specific combination of goods and services that maximises societal welfare and matches consumer demand.
Occurs when price equals marginal cost, which is achieved in perfectly competitive markets.
Improves as firms compete for market share, which can lead to lower prices.
Topics that use Allocative efficiency
- Market structure, static efficiency, dynamic efficiency (AQA A-Level)
- Perfect competition (AQA A-Level)
- Production possibility diagrams (AQA A-Level)
- Public ownership, privatisation, regulation and deregulation of markets (AQA A-Level)
- The dynamics of competition and competitive market processes (AQA A-Level)
- The meaning of market failure (AQA A-Level)
Related terms
- Productive efficiency
- Dynamic efficiency
- Externalities
- Monopoly power
- Resource allocation
- Asymmetric information
- Average revenue
- Barriers to entry
Using Allocative efficiency in the exam
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