Routledge Dictionary of Economics, Second Edition
allocative efficiency (M2)
The selection of factor inputs which minimises the cost of producing goods and services to satisfy given wants, subject to resource and technological constraints.
This allocation includes efficiency of both production and distribution. Setting out the conditions for efficiency, including the appropriate set of prices, has been the concern of WELFARE ECONOMICS. Recognition of the existence of INDIVISIBILITIES and EXTERNALITIES has necessitated departures from the approach of NEOCLASSICAL ECONOMICS.
See also: Pareto optimality
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