Productive and Allocative Efficiency

Flashcards about Productive and Allocative Efficiency

Productive Efficiency

Occurs where no additional (or maximum) output can be produced from the factor inputs available at the lowest possible average or unit cost

Allocative Efficiency

Occurs where consumer satisfaction is maximised in the production of goods and services; quantity supplied will equal quantity demanded

Economic Efficiency

Occurs where allocative and productive efficiency occur at the same time.

Average Cost

Total cost divided by output.

Marginal Revenue

The additional revenue gained from selling one more unit,

Marginal Cost

The cost of producing one more unit.

Minimum Efficient Scale (MES)

The scale of production where the long run average cost curve is at its lowest point.

Market Orientation

An outward looking approach to new product development where the key focus is on what products the consumer wants.

Human Capital

Skills training and education