ALLOCATIVE EFFICIENCY: Obtaining the most consumer satisfaction from available resources. In other words, resources are allocated in such a way that consumer satisfaction is at its highest possible level. This is also termed either efficiency or economic efficiency.Allocative efficiency means the economy is doing the best job possible of satisfying unlimited wants and needs with limited resources--that is, of addressing the problem of scarcity. To achieve allocative efficiency, however, the economy must first achieve technical efficiency. Technical efficiency means that society is getting the most production from available resources. In other words, there is no waste in the production process. Allocative efficiency, however, means that this technically efficient production is also useful to or valued by people. While technical efficiency might be achieved in the production of purple spotted stuffed animals, allocative efficiency is not achieved if no one actually wants purple spotted stuffed animals and they remain stored in a big purple warehouse. Check Out These Related Terms... | efficiency | technical efficiency | consumer sovereignty | satisfaction | production | full employment | Or For A Little Background... | allocation | resource allocation | scarcity | limited resources | unlimited wants and needs | economic goals | factors of production | economic thinking | And For Further Study... | distribution standards | economic system | seven economic rules | production possibilities | three questions of allocation | Recommended Citation: ALLOCATIVE EFFICIENCY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2025. [Accessed: December 16, 2025]. |
