Teachers should copy from this!!! It's because of you guys that I topped Business and Economics in my IGCSE and AS levels!!! Allocative efficiency exisists where Community Surplus (consumer surplus and producer surplus) is maximized. Allocative Efficiency, also sometimes called social efficiency, means that scarce resources are used in a way that meets the needs of people in a Pareto-optimal way, and is not to be confused with the concept that resources are used to meet the needs as best as possible. vaccination for flu will benefit all It can be achieved when goods and/or services have been distributed in an optimal manner in response to consumer demands (that is, wants and needs), and when the marginal cost and marginal utilityof goods and services are equal. Therefore, the point at which this occurs is where demand (also equal to AR) is equal to supply (also equal to MC). Perfect competition – allocatively efficient. allocative efficiency Occurs where the marginal social cost of producing a good is equal to the marginal social benefit of the good to society. 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Hence, the optimal outcome is achieved when marginal cost (MC) equals marginal benefit (MB). Allocative efficiency is a state when the market equilibrium is at a price that represents consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of supply. Allocative efficiency is reached when no one can be made better off without making someone else worse off. This is where the marginal cost (MC) = marginal utility. Allocative efficiency means that the particular mix of goods a society produces represents the combination that society most desires. We hope this will serve as a directory of our Economics resources for IB Economics … In different words, it occurs where the marginal cost of producing a good (including any external costs) is equal to the price that is charged to consumers. - P=MC is allocative efficiency... but why? Period of time in which at least one cost for FoP is fixed (quantity of at least one input is fixed) 1. IB Economics/Microeconomics/Key Terms. ! 1.1.1.1. Geoff Riley FRSA has been teaching Economics for over thirty years. Allocative efficiency exisists where Community Surplus (consumer surplus and producer surplus) is maximized. Allocative efficiency. Allocative efficiency happens when competitive market is in equilibrium, where resources are allocated in the most efficient way from society’s point of view. Economics Higher level Paper 3 14 pages International Baccalaureate Organiation 20 15 8815 – 5107 Wednesday 4 November 2015 (morning) Instructions to candidates • Write your session number in the boxes above. Allocative efficiency refers to making the best possible use of scarce resources to produce the combinations of goods and services that are optimum for society, thus minimizing resource waste. You can decide for yourself whether you want to allow cookies or not. 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