Allocatively efficient market
Definition
An allocatively efficient market is a situation where resources are allocated in the most optimal way to maximize social welfare. This occurs when the marginal benefit equals the marginal cost.
Analogy
Imagine you're at an all-you-can-eat buffet, and you want to get the most value for your money. You keep going back for more food until the satisfaction you get from eating one more plate is equal to the cost of getting that plate. That's when you've reached allocative efficiency!
Related terms
Marginal Benefit: The additional benefit gained from consuming or producing one more unit of a good or service.
Marginal Cost: The additional cost incurred from consuming or producing one more unit of a good or service.
Social Welfare: The overall well-being and happiness of society as a whole.
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