1. Starter – recap test Define opportunity cost, using an example (3)
Define the following terms (3)
Profit Maximisation
Sales Maximisation
Satisficing
Explain what is meant by social objectives, using an example to help (2)
Define stakeholder, using examples to help (2)

2. Lesson Objectives
All students will understand the difference between allocative and productive efficiency
Some students will be able to relate this to different contexts
Few students will understand the importance of allocative and productive efficiency on the economy

3. Productive efficiency
In very competitive markets firms need to:
minimise costs
Accept market prices
Keep up with developments
Operating at minimum costs is productive efficiency and resources are not wasted

4. Improving productive efficiency
Technology
Human Capital improvement
Quality of managemnt

5. Allocative efficiency
Allocative efficiency occurs when resources are allocated between competing uses in a way that matches the requirements of consumers to the greatest possible extent

6. Figure 3 pg 25
The logic of allocative efficiency

7. The significance of the margin
Millions of economic decisions are made every day, from choosing which chocolate bar to buy, to whether or not to build a new school.
Each of these decision come with a trade off because of the opportunity cost involved
The choice is made based on the value of that choice being greater than the alternative foregone, even if that choice is only slightly marginal
As long as the marginal benefit is greater than the marginal cost, the choice makes economic sense.

8. Market orientation
If firms are focussed on what the market wants it is market orientated, (rather than product orientation)
If firms are market orientated, allocative efficiency gains should be gained
Firms that provide what customers want will become stronger, those that don’t will not survive, allocative efficiency will result

9. How markets interact Look at exam style Q pg 28
Work in pairs to create a plan for this answer in your note book

10. HWK WE have now completed Theme 4 – Section 1
Revise for a 20 mark essay question next lesson from any of the topics covered so far