ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Therefore, the market equilibrium, where demand meets supply, is also where the marginal social benefit equals the marginal social costs. At this point, the net social benefit is maximized, meaning this is the allocative efficient outcome.

Detailed explanation-2: -The state of allocative efficiency happens when supply and demand are balanced such that the cost for a particular supply exactly lines up with the demand for the product.

Detailed explanation-3: -Definition of allocative efficiency This is because the price that consumers are willing to pay is equivalent to the marginal utility that they get. Therefore the optimal distribution is achieved when the marginal utility of the good equals the marginal cost.

Detailed explanation-4: -Allocative efficiency is the level of output where marginal cost is as close as possible to the marginal benefits. It means that the price of the product or service is close to the marginal benefit that one gets from using that product or service.

Detailed explanation-5: -Allocative efficiency can only occur when the marginal utility of a good or service is the same for both the buyer and seller. Such efficiency is most likely to occur in a competitive market.