What is an economically efficient allocation. How does an economically efficient allocation differ from an inefficient allocation?

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An economically efficient allocation refers to a distribution of resources where it is impossible to make someone better off without making someone else worse off. This concept, rooted in the principle of Pareto efficiency, ensures that resources are used in a way that maximizes total social welfare or utility. In an efficient allocation, no resources are wasted, and production and consumption align with individuals' preferences and market equilibrium conditions. 

Efficient Allocation Characteristics:
1. Productive Efficiency: Resources are used to produce goods and services at the lowest possible cost.
2. Allocative Efficiency: The mix of goods and services produced matches consumer preferences. The marginal cost of production equals the marginal benefit to consumers.
3. Pareto Optimality: Any reallocation of resources that benefits one party ______ ________ ___________ ____________ ______ __ __________ ___________ ____ ___________ ____ ______.
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Degree : BACHELOR DEGREE PROGRAMMES
Course Name : BACHELOR OF ARTS
Course Code : BAG
Subject Name : Principles of Microeconomics-II
Subject Code : BECC 132
Year : 2024 2025