5 MOL! – Allocative Efficiency

If every point on the PPC is productive efficient, are all the points equally good?

ACOn the diagram, points B and C are productive efficient as all the resources are fully utilised. This doesn’t help answer the economic problem of what and how much to produce. Should the economy produce at point B, C or on some other point? Hence, another yardstick is required to measure the efficiency of the economy.

Continue reading →

Please follow and like us: