Question

Inefficiency exists in any economy when a good is not being consumed by buyers who value it most highly. This is related to:

a) Market equilibrium
b) Consumer surplus
c) Allocative efficiency
d) Inefficiency

Answer 1

Inefficiency exists when a good is not consumed by buyers who value it the most. This is related to allocative efficiency.

Step-by-step explanation:

Inefficiency exists in any economy when a good is not being consumed by buyers who value it most highly. This is related to allocative efficiency.

Allocative efficiency refers to the situation where resources are allocated in a way that maximizes social welfare and consumer satisfaction. In a market with allocative efficiency, goods and services are consumed by buyers who value them the most, resulting in the optimal allocation of resources.

For example, in the market for tablet computers, if the equilibrium price is $80 and some consumers are willing to pay more than $80 for a tablet, then there is inefficiency because these buyers who value tablets more highly are not able to consume them.