Opportunity Cost - Productive vs Allocative Efficiency
• Opportunity Cost:
-Opportunity cost: The next best alternative that you must give up in order to yet something else.
-Law of Increasing Opportunity Cost: As you produce more of one good, the opportunity cost ( the forgone production of another good) will increase
• Productive efficiency vs allocative efficiency:
-Productive efficiency: Products are being produced in the least costly way. (points on the curve)
(though we have not yet learned this form of graph, i feel it effectively portays the concept of productive efficiency.)
-Allocative Efficiency: The products being produced are most desired by the society. (points everywhere)
-Opportunity cost: The next best alternative that you must give up in order to yet something else.
-Law of Increasing Opportunity Cost: As you produce more of one good, the opportunity cost ( the forgone production of another good) will increase
• Productive efficiency vs allocative efficiency:
-Productive efficiency: Products are being produced in the least costly way. (points on the curve)
(though we have not yet learned this form of graph, i feel it effectively portays the concept of productive efficiency.)
-Allocative Efficiency: The products being produced are most desired by the society. (points everywhere)
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