EcoGuy
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Report Thread starter 6 years ago
#1
Hi guys,

Just wondering what is meant by allocative and productive efficient?

Also what markets are and aren't allocative and productive efficient?
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gozzabomb
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so on a production possibility frontier, we see all combinations of 2 goods when factors of productions are used best, thus any point on the frontier is productively efficient. Productively efficient simply refers to the use of factors of production (inputs) to their best technical use, any point on the ppf does this.

allocatively efficient includes market forces: it is when inputs are used to their best to give what consumers/society want, thus using a demand-suppy graph you can decide on what point on a ppf is allocatively efficient. In a market economy, it is decided by the market at what point it is allocatively efficient.
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EcoGuy
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Thank you
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gozzabomb
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no worries, rep me if you like
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