Final answer:
Allocative efficiency refers to the allocation of resources in a way that allows for the increase in production of one good without decreasing the production of another good.
Step-by-step explanation:
Allocative efficiency refers to the allocation of resources in a way that allows for the increase in production of one good without decreasing the production of another good. This means that resources are allocated in a manner that maximizes the overall benefit or satisfaction derived from the production of goods and services.
For example, let's consider a hypothetical scenario where a country produces both cars and computers. If the resources are allocated in such a way that the production of cars can be increased without reducing the production of computers, then this allocation would be considered allocatively efficient.
Allocative efficiency is an important concept in economics as it ensures that resources are utilized in a way that maximizes societal welfare and satisfaction.