The CEP

H2 Economics 2026

Positive

factual & objective

Normative

subjective & value-based

Opportunity cost

the value of the next best alternative forgone

Actual Economic growth

Actual growth is the growth in actual output

Potential economic growth

Potential growth is the increase in the economy’s capacity to produce more goods (productive capacity)

Productive efficency

Economy produces largest possible output while firms produce with the lowest possible average cost

Allocative efficiency

Economy allocates resources to produce the combination of good most wanted by society. Society welfare is maximised.

Dynamic efficiency

Optimal investments in physical and human resources and technology.

Productvity and product quality is improved to continuously meet the changing needs and wants of consumers over time.

This maximised society’s long run welfare.