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    Are there real life examples of allocative or productive efficiency?
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    (Original post by crulobre_24)
    Are there real life examples of allocative or productive efficiency?
    Productive efficiency is something you'd expect firms in most competitive markets to trend towards, because they have little pricing power in markets with a lot of competition and thus will rely more greatly on cost control and improving the efficiency of their production capability to boost profit levels. To use a personal example from my holiday, you will find a lot of firms in Shenzhen that produce the same component for some technological device. These firms don't leverage much pricing power as I could go to another factory across the road and order from them instead if they hiked their prices. So, the main way they can sustain their margins it by minimising their cost of production for that component.

    Allocative efficiency has a slight social/moral element to it, but is essentially about maximising overall social utility by ensuring the value of something maximises the value of the resources used to produce it. You don't want, for example, an economy that only produces guns which takes away money from improving healthcare (or other uses seen as more socially beneficial).

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