Question

It is clear that productive efficiency is a waste since resources are being used a way that produces less goods and services definition is capable of why is allocative inefficiency also wasteful? ... Please explain 2nd part of question too​

Answer 1

Answer:

What Is Production Inefficiency:

Production Inefficiency is a term that is often used in Economics when assessing the level of controllable waste generated by an operation. Production Inefficiency relates to the waste generated by not using the most productive technology available to produce goods or services.

Although allocative efficiency is generally seen as a positive factor for an economy, it remains wasteful for the economy.

Although allocative efficiency is generally seen as a positive factor for an economy, it remains wasteful for the economy.

Answer and Explanation:

Although allocative efficiency is generally seen as a positive factor for an economy, it remains wasteful for the economy.

• This is because the economy is simply not producing as much as it potentially can produce. While productive efficiency relates to how goods are produced (i.e. minimizing inputs and maximizing outputs), allocative efficiency relates to how many goods are produced. Since allocative efficiency will only produce goods based on consumer demand levels, then naturally the company will have "spare capacity" which is wasted production potential.