1.2 The Allocation of Resources

Question 1

Allocative efficiency

Answer 1

When resources are allocated to the best interests of society, when there is maximum social welfare and maximum utility; P=MC

Question 2

Economic efficiency

Answer 2

When resources are allocated optimally, so every consumer benefits and waste is minimised

Question 3

Incentive

Answer 3

Something which motivates an individual to make a decision and behave a certain way

Question 4

Market economy

Answer 4

An economy where the market mechanism allocates resources so consumers make decisions about what is produced

Question 5

Maximisation

Answer 5

Consumers aim to generate the greatest utility possible, firms aim to generate the highest profits possible

Question 6

Mixed economy

Answer 6

Both the free market mechanism and the government allocate resources.

Question 7

Planned econmoy

Answer 7

All factors of production are allocated by the state, so they decide what, how and for whom to produce goods

Question 8

Productive efficiency

Answer 8

When resources are used to give the maximum possible output at the lowest possible cost; MC=AC

Question 9

Resource allocation

Answer 9

How resources are distributed among producers and how goods and services are distributed among consumers