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Definition

Allocative Efficiency

Allocative Efficiency is a neoclassical concept referring to the allocation of productive resources(capital, labour, etc.) in a manner which best maximizes the well-being (or “utility”) of individuals.


Allocative efficiency is the action of satisfying as far as is possible customer demands for goods and services by pricing them at a price which is near to the production cost while still allowing a margin to the producer. If a market is allocative efficient it produces the right amount of goods at the right prices for the right customers.

Category: Economics
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