Efficiency Flashcards
What is allocative efficiency
Where society surplus is maximised
Where net social benefit is maximised
MC=AR (demand and supply meet)
What is productive efficiency
When a firm is operating at the lowest point in their AC curve
How does productive efficiency effect the consumer
Lower prices
High consumer surplus
Full exploitation of EOS
How does productive efficiency effect the producer
More production at lower AC
Higher profit
Lower prices and greater market share
How does allocative efficiency effect the consumer
Resources follow consumer demand
Low prices
Maximisation of consumer surplus
High choice
High quality
How does allocative efficiency effect producer
Retain or increase market share
Stay ahead of rivals
Increase profit
What is dynamic efficiency
Re investment of super normal profits into innovation,
Research and development + new tech to lower long run actual costs
Supernormal profits in the long run
How does dynamic efficiency effect consumer
New innovative products
Lower prices over time
High consumer surplus
How does dynamic efficiency effect producer
Long run profit maximising
Lower costs over time
Retain/increase market share
Stay ahead of rivals
What is X efficiency
Production with no waste
Production is on the AC curve
How does X efficiency effect consumers
Low prices
High consumer surplus
How does X efficiency effect producer
Lower costs
Higher profit
Lower prices and increase market share
