Asked by ShahirEconomics 📈

If on the PPF diagram, a point is not on the curve, but yet is allocatively efficient because customer demand is met, is the point still considered allocatively efficient?

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David Mageller

If you love what you do, you'll never work a day in your life - Someone

If it’s within the curve, it cannot be allocatively efficient. Definitions are always really important for questions like this. Allocative Efficiency - a state of the economy in which production 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 producing. Allocative efficiency means that the particular mix of goods a society produces represents the combination that society most desires. For example, often a society with a younger population has a preference for production of education, over production of health care. If the society is producing the quantity or level of education that the society demands, then the society is achieving allocative efficiency. Determining “what a society desires” can be a controversial question and is often discussed in political science, sociology, and philosophy classes, as well as in economics. The important thing to remember is that if it’s below the curve, there is unmet potential. Feel free to ask again if there’s something you aren’t sure.

Profile picture

David Mageller

If you love what you do, you'll never work a day in your life - Someone

If it’s within the curve, it cannot be allocatively efficient. Definitions are always really important for questions like this. Allocative Efficiency - a state of the economy in which production 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 producing. Allocative efficiency means that the particular mix of goods a society produces represents the combination that society most desires. For example, often a society with a younger population has a preference for production of education, over production of health care. If the society is producing the quantity or level of education that the society demands, then the society is achieving allocative efficiency. Determining “what a society desires” can be a controversial question and is often discussed in political science, sociology, and philosophy classes, as well as in economics. The important thing to remember is that if it’s below the curve, there is unmet potential. Feel free to ask again if there’s something you aren’t sure.

Profile picture

David Mageller

If you love what you do, you'll never work a day in your life - Someone

If it’s within the curve, it cannot be allocatively efficient. Definitions are always really important for questions like this. Allocative Efficiency - a state of the economy in which production 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 producing. Allocative efficiency means that the particular mix of goods a society produces represents the combination that society most desires. For example, often a society with a younger population has a preference for production of education, over production of health care. If the society is producing the quantity or level of education that the society demands, then the society is achieving allocative efficiency. Determining “what a society desires” can be a controversial question and is often discussed in political science, sociology, and philosophy classes, as well as in economics. The important thing to remember is that if it’s below the curve, there is unmet potential. Feel free to ask again if there’s something you aren’t sure.

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