Occurs where resources are allocated to their highest value usage. An important condition for allocative efficiency is that those who value a product more than the additional cost of producing it are provided with it, and those who value a product less than the additional cost of producing it are not provided with it.
Obtaining the most consumer satisfaction from the resources which are available. When allocative efficiency is attained, the economy is doing the best job possible of satisfying unlimited wants with limited resources. Contrast with technical efficiency.
Allocative efficiency is the market condition whereby resources are allocated in a way that maximizes the net benefit attained through their use. Allocative efficiency refers to a situation in which the limited resources of a country are allocated in accordance with the wishes of consumers. An allocatively efficient economy produces an "optimal mix" of commodities.
is achieved when prices are close to cost, which ensures that all customers who value a product at more than its cost are able to purchase it and customers who value it at less than its cost do not purchase it.