Allocative Efficiency Calculator

How to Use the Calculator

1. Enter the market price of the good or service in the "Market Price" field.
2. Enter the marginal cost of producing the good or service in the "Marginal Cost" field.
3. Click the "Calculate" button to determine the allocative efficiency.
4. The result will be displayed in the "Allocative Efficiency" field.

Understanding Allocative Efficiency

Allocative efficiency occurs when the price of a good or service equals its marginal cost of production. This indicates that resources are being allocated to produce the goods and services that consumers value most.

If the allocative efficiency is 1, it means the market is perfectly allocatively efficient. If it is less than 1, it means there is room for improvement in resource allocation.