IBDP ECONOMICS HL Allocative Efficiency CHEAT SHEET

allative Cichy
Achieved when the
refers to
producing the
quantity of goods mostly wanted by society
.




allocates its that
economy
resources so
society gets the most benefits from consumption

DEMAND AS A MARGINAL BENEFIT CURVE IM B)

The quantity
greater the
good consumed by
of a a consumer
,
the
greater the satisfaction
But the ,
extra
benefit provided by each additional unit increases
by smaller and smaller ants
↳
marginal benefit
This means that the price the consumer is
willing to pay gets smaller as the number of units
bought
Increases ,
% consumers will
only be
willing to
buy an extra unit if the price falls .




SUPPLY AS A MARGINAL COST CURVE IM C) cost
p marginal
As the units of outputs increase ,
so does the extra cost to
produce one more output of the
good
This means that
producers will be willing to produce / sell an extra unit of the
good only it's price
increases .




C demand ) )
g) supply
curve ( curve



ALLO CAT WE EFFICIENCY 8 M¥ =
MC
6
extra benefit to society of getting one more unit of the
good = extra cost to


society of producing one more unit of the good .




Alternatively ,




if MB > MC ( more should be
produced ) society places a
greater value on an extra unit of the
good than


it costs to
produce it


if Mc > MB (less should be produced) It costs to produce extra unit
good than the value
more an
of the



society puts on it