Economics Production Possibility Frontier Questions
Productive efficiency refers to the situation where an economy is producing goods and services at the lowest possible cost, given the available resources and technology. It means that the economy is utilizing its resources efficiently and producing the maximum output possible.
On the other hand, allocative efficiency refers to the situation where an economy is producing the combination of goods and services that best satisfies the preferences and needs of society. It means that resources are allocated in a way that maximizes social welfare and the overall satisfaction of individuals.
In summary, productive efficiency focuses on minimizing costs and maximizing output, while allocative efficiency focuses on maximizing social welfare and satisfying societal preferences.