Unit 2.3 · Competitive Market Equilibrium
Allocative Efficiency
AO2AO4Diagram required
Syllabus Requirement
Occurs at the competitive market equilibrium where marginal benefit (MB) equals marginal cost (MC), and social surplus is maximized.
Assessment Objectives
AO2Application and Analysis
AO4Use of Appropriate Skills
Summary
Allocative efficiency occurs when resources are distributed in a way that maximizes community surplus, meaning that no changes in price can make consumers or producers better off. This concept is crucial in evaluating how well economic decisions enhance or diminish overall economic welfare.
