Y1 21) What is Allocative Efficiency?

Y1 21) What is Allocative Efficiency?
Y1 21) What is Allocative Efficiency? Crucial video to understand a fundamental concept is Economics - What is Allocative Efficiency?
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[@ohyeahohyeah8855]

congrats on 50k

[@ramanujanvenkatraman8540]

The 14 dislikes are students who forgot to write cetirus paribus

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cant see them dislikes anymore ;-;

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u can with browser extentions@@freddy5713

[@ryanpatel7794]

peng trim

[@zaindbd]

thanks vikk

[@UmuPadoru]

Thank you so much, I actually kind of understand this now

[@keyser1989]

Congrats on 100k

[@user-tz1zf8qn2m]

you are the hero to my grades

[@Matt-ot1jn]

Ive not got this for a year before this video THANK YOU

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Thank you for your help!

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Thank You So Much.

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love you dal ur the best

[@samueljwilson418]

Not sure if this video is meant to be out yet but 3 vids in 1 day, I feel spoilt.Also I'm in year 12 looking to do economics at uni and wondered if you had any tips or advice, cheers :)

[@samueljwilson418]

Also congrats on 50k

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Hey bro how’s life going

[@Patrick-cq7ck]

@@mangow8257 good thanks

[@Ahmed-ln1fv]

@@Patrick-cq7ck did you end up doing econ at uni?

[@antisocialbarbie1587]

Are you done with uni?

[@sawaab.a3756]

exam tom OMFG

[@ric6383]

Thanks.

[@bensear]

❤

[@yufeizhu4761]

Does it mean that the assumption behind the allocative efficiency model is perfect competition market?

[@billyfox6368]

Yes, that's the problem with non-competitive markets: it's market failure because they're inefficient.

[@jamiek8603]

@@billyfox6368 is this still applicable to monopolies/oligopolies then if i reverse the arguments?

[@billyfox6368]

@@jamiek8603 Yes, monopolies and collusive oligopolies - non-competitive markets - are examples of market failure because they tend to be allocatively inefficient.

[@jamiek8603]

@@billyfox6368 thanks

[@justintyme7787]

I am struggling to understand why net social benefit increases the closer you get to Q*, since surely NET means SB - SC (which is why it isn't maximised when quantities past Q* are produced), and therefore net social benefit would be greatest at 0,0 since SB is at its highest and SC is at its lowest? Thanks for clearing this up!

[@justintyme7787]

Actually I understand now. I was looking at it as if it were a single point at equilibrium, in which case SB = SC so Net SB = 0. However I should have seen it as a continuous line until the point of equilibrium, in which case the Net SB still increases, just with a diminishing rate until the point of equilibrium (past the point of equilibrium the Net SB would start decreasing).

[@_DigitalData]

@@justintyme7787 This helped me a lot. Thank you for the explanation.

[@user-gj4zg4tj3w]

Am I right to say allocative efficiency is where welfare is maximised, as price is as low as possible without the firm making a loss? Allocative efficiency=sales max=welfare max=(AR=MC)?

[@rushdashaikh5380]

that is correct marginal cost will need to be equal to price for allocative efficiency

[@subrotochatterjee5788]

Price = Average revenue (AR), which is represented by the demand curve. Also, the supply curve represents the marginal cost curve. At equilibrium, MR = MC = AR.

[@saam63723]

thanksssssssss

[@Jackr889]

i love u

[@ayushhongkong]

my teacher taught me although we say marginal private "cost" it still refers to a firms positive gain aswell, is this true???? someone please help.

[@billyfox6368]

Well, in a perfectly competitive market, there are no supernormal profits, so marginal cost equals marginal revenue. Marginal revenue is the same as price (as that's basically what price is i.e. how much the consumer pays for the good i.e. how much the producer receives for each good sold). Consequently, yes, the y-axis is all price, costs and welfare (which should equal price for the consumer in order for it to be worth the opportunity cost).

[@seniruhasith1667]

Cant we say (-social cost= social benefit).?

[@aidenstonehouse9651]

I don't understand why you're saying past Q* cost is higher then benefit. What do you mean by this?

[@robertvlcek9870]

Because any point past Q* on the Demand curve (the MSB) will be at a lower price than any point on the supply (MSC) curve. That means that producing a product past Q* will bring only the relevant benefit (expressed by price which will now be getting lower and lower) which will be lower than the price of the MSC (which start getting bigger and bigger past Q*). This means the cost to society will be bigger than the benefit to society which is now getting lower and lower. Imagine building one school in a city of 1 million people. The MSB is going to be massive for the society but the cost is going to be relatively low considering the number of people in the city. So you start building more schools until you get to point Q*. If you go past that by building a school in every street, this will now cause the social cost to be much higher than the benefit. We don't need so many schools.

[@michellepun3894]

how does the law of diminishing marginal returns relate to mpc?

[@maratmammadov6672]

idk

[@rxb177]

@@maratmammadov6672 so what’s the point in replying then😎

[@maratmammadov6672]

@@rxb177 point is to reply to your answer because all questions have their own answers in this case my point is not to give correct answers t u my point is to give answers for your question

[@kaibaing4288]

Marginal Private cost represent marginal cost of production
And as we know law of diminishing returns,states how mc initially decreases due to specialization then stagnates and then increases tremendously due to congestion.

[@grundewesenberg6946]

You make an assumption early on that MPC=MSC in a free market (no external costs), that you don't include in the list of assumptions at the end.

[@chang873]

But if I understood correctly, the assumptions outlined at the end all support the statement that MPC=MSC and MPB=MSB. If one of those factors changes, than MPC and MSC wouldn't be equal leading to market failure. He mentions MPC=MSC as a statement based on those assumptions, I think it's all linked together.

[@oneinabillion654]

Then does P=MC mean that P is MSB and MC is MSC?

[@loveridgelads]

well, Demand = MSB (perfect competition), Demand = AR, AR = Price, so yes in a sense, but not directly

[@oneinabillion654]

@@loveridgelads That's why I didn't understand the reason for calling things demand if they don't fully represent demand LOL

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