Allocative Efficiency

Economics 1 Being on the curve might still not fully satisfy allocative efficiency (also called Pareto efficiency) if it does not produce a mix of goods that consumers prefer over other points.

Economics 1 Welfare economics is a normative branch of economics that uses microeconomic techniques to simultaneously determine the allocative efficiency within an economy and the income distribution associated with it. It attempts to measure social welfare by examining the economic activities of the individuals that comprise society.

Decentralization - Critiques 1 It has been noted that while decentralization may increase "productive efficiency" it may undermine "allocative efficiency" by making redistribution of wealth more difficult. Decentralization will cause greater disparities between rich and poor regions, especially during times of crisis when the national government may not be able to help regions needing it.

Efficiency - In economics 1 Allocative efficiency, an optimal distribution of goods

Competition law - Neo-classical synthesis 1 Because rational producers will keep producing and selling, and buyers will keep buying up to the last Marginalism|marginal unit of possible output – or alternatively rational producers will be reduce their output to the margin at which buyers will buy the same amount as produced – there is no waste, the greatest number wants of the greatest number of people become satisfied and Utilitarianism|utility is perfected because resources can no longer be reallocated to make anyone better off without making someone else worse off; society has achieved allocative efficiency

Decentralization - Critiques 1 It has been noted that while decentralization may increase productive efficiency it may undermine allocative efficiency by making redistribution of wealth more difficult

Economic efficiency - Allocative and productive efficiency 1 A market can be said to have allocative efficiency if the price of a product that the market is supplying is equal to the value consumers place on it, represented by marginal cost.

Economic efficiency - Allocative and productive efficiency 1 Because productive resources are scarce, the resources must be allocated to various Industries in just the right amounts, otherwise too much or too little output gets produced. (Thomas. Government Regulation of Business McGraw-Hill.) When drawing diagrams for firms, allocative efficiency is satisfied if the equilibrium is at the point where marginal cost is equal to average revenue. This is the case for the long run equilibrium of perfect competition.

Law and economics - Normative law and economics 1 Normative law and economics goes one step further and makes policy recommendations based on the economic consequences of various policies. The key concept for normative economic analysis is efficiency (economics)|efficiency, in particular, allocative efficiency.

Law and economics - Pareto efficiency 1 Under the theory of the second best, for example, if the fulfillment of a subset of optimal conditions cannot be met under any circumstances, it is incorrect to conclude that the fulfillment of any subset of optimal conditions will necessarily result in an increase in allocative efficiency.

Law and economics - Pareto efficiency 1 Consequently, any expression of public policy whose purported purpose is an unambiguous increase in allocative efficiency (for example, consolidation of research and development costs through increased mergers and acquisitions resulting from a systematic relaxation of anti-trust laws) is, according to critics, fundamentally incorrect, as there is no general reason to conclude that an increase in allocative efficiency is more likely than a decrease.

Value (economics) - Connected concepts 1 The theory of value is closely related to that of allocative efficiency, the quality by which firms produce those goods and services most valued by society. The market value of a machine part, for example, will depend upon a variety of objective facts involving its efficiency versus the efficiency of other types of part or other types of machine to make the kind of products that consumers will value in turn. In such a case, market value has both objective and subjective components.

Production function 1 The primary purpose of the production function is to address allocative efficiency in the use of factor inputs in production and the resulting distribution of income to those factors, while abstracting away from the technological problems of achieving technical efficiency, as an engineer or professional manager might understand it.

Production function - The theory of production functions 1 (Alternatively, a production function can be defined as the specification of the minimum input requirements needed to produce designated quantities of output.) Assuming that maximum output is obtained from given inputs allows economists to abstract away from technological and managerial problems associated with realizing such a technical maximum, and to focus exclusively on the problem of allocative efficiency, associated with the economic choice of how much of a factor input to use, or the degree to which one factor may be substituted for another

Production function - The theory of production functions 1 The production function is central to the marginalist focus of neoclassical economics, its definition of efficiency as allocative efficiency, its analysis of how market prices can govern the achievement of allocative efficiency in a decentralized economy, and an analysis of the distribution of income, which attributes factor income to the marginal product of factor input.

Inflation - Negative 1 The result is a loss of economic efficiency|allocative efficiency.

Production possibility frontier 1 A PPF can be used to illustrate a number of economic concepts, such as scarcity of resources (i.e., the Economic problem|fundamental economic problem all societies face), opportunity cost (or marginal rate of transformation), productive efficiency, allocative efficiency, and economies of scale

Production possibility frontier - Other applications 1 However, an economy may achieve productive efficiency without necessarily being allocative efficiency|allocatively efficient

Paul Samuelson - Fields of interest 1 * Public finance theory, in which he is particularly known for his work on determining the Allocative efficiency|optimal allocation of resources in the presence of both public goods and private goods.

X-efficiency - Overview 1 In this sense, X-inefficiency focuses on productive efficiency and minimising costs rather than allocative efficiency and maximising welfare.

Perfect competition - Basic structural characteristics 1 They are Allocative efficiency|allocatively efficient, as output will always occur where marginal cost is equal to marginal revenue (MC=MR).

Industrial policy - Debates on the 'How to' of Industrial Policy 1 These market failures hinder the emergence of a well-functioning market and corrective industrial policies are required to ensure the allocative efficiency of a free market

Inefficiency 1 *'Allocative efficiency|Allocative inefficiency' - Allocative inefficiency is a situation in which the distribution of resources between alternatives does not fit with consumer taste (perceptions of costs and benefits)

Price inflation - Negative 1 The result is a loss of economic efficiency|allocative efficiency.

Economic theory - Public sector 1 Welfare economics is a normative branch of economics that uses microeconomics|microeconomic techniques to simultaneously determine the allocative efficiency within an economy and the income Distribution (economics)|distribution associated with it. It attempts to measure social welfare by examining the economic activities of the individuals that comprise society.Feldman, Allan M. (1987). welfare economics, The New Palgrave: A Dictionary of Economics, v. 4, pp. 889–95.

John Kenneth Galbraith - New industrial state 1 The social cost of this monopoly power is a decrease in both allocative efficiency and the equity of income distribution

Lange model - Advantages 1 Furthermore, because the state uses marginal cost pricing and determines entry, monopolies, and the accompanying lack of allocative efficiency and x- inefficiency|x-efficiency can be avoided under Langean socialism.

Allocative efficiency 1 Allocative efficiency is the main tool of welfare analysis to measure the impact of markets and public policy upon society and subgroups being made better or worse off.

Allocative efficiency 1 Although there are different standards of evaluation for the concept of allocative efficiency, the basic principle asserts that in any economic system, choices in resource allocation produce both winners and losers relative to the choice being evaluated. The principles of rational choice, individual maximization, utilitarianism and market theory further suppose that the outcomes for winners and losers can be identified, compared and measured.

Allocative efficiency 1 Under these basic premises, the goal of maximizing allocative efficiency can be defined according to some neutral principle where some allocations are objectively better than others. For example, an economist might say that a change in policy increases allocative efficiency as long as those who benefit from the change (winners) gain more than the losers lose.

Allocative efficiency - Conditions 1 It is possible to have Pareto efficiency without allocative efficiency. By shifting resources in the economy, a gain in benefit to one individual could be greater than the loss in benefit to another individual (see Kaldor-Hicks efficiency). Therefore, before such a shift, the market is not allocatively efficient, but might be Pareto efficiency|Pareto efficient.

Private electronic market - Relevance 1 The overall effect of a well designed Private Electronic Market is what is described as allocative efficiency or in simple terms: a win-win for the seller (who maximizes revenue) and buyers (acquiring exactly what is of highest value to them). PEMs are based on game theory and combinatorial auction theory.

Financial market efficiency 1 The most common type of efficiency referred to in financial markets is the allocative efficiency, or the efficiency of allocating resources. This includes producing the right goods for the right people at the right price.

External 1 Thus, unregulated Market (economics)|markets in goods or services with significant externalities generate prices that do not reflect the full social cost or benefit of their transactions; such markets are therefore Allocative efficiency|inefficient.

Productive efficiency 1 'Productive efficiency' occurs when the economy is using all of its resources efficiently. The concept is illustrated on a production possibility frontier (PPF) where all points on the curve are points of maximum productive efficiency (i.e., no more output can be achieved from the given inputs). An equilibrium may be productively efficient without being allocative efficiency|allocatively efficientmdash; i.e. it may result in a distribution of goods where social welfare is not maximized.

Harvey Leibenstein 1 The concept of x-efficiency was introduced by Harvey Leibenstein in his paper Allocative efficiency v

Harvey Leibenstein - Selected Publications 1 * 1966, Allocative Efficiency vs. X-Efficiency, The American Economic Review, Vol. LVI., June

Price gouging - Opposition to laws against price gouging 1 Allocative efficiency refers to when prices function properly, markets tend to allocate resources to their most valued uses

David L. Chicoine - Academic articles 1 *Chicoine, David L., Steven C. Deller, [ hort Representative Versus Direct Democracy: A Test of Allocative Efficiency in Local Government Expenditures], Public Finance Review, Vol. 21, No. 1, January

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