00:01
Hey everyone, today we're answering problem 15 from chapter 2 of the textbook, where we want to differentiate the different types of choices we can make on a production possibilities curve.
00:11
So in terms of what is most efficient, we have two terms that you should know about the production possibilities curve.
00:18
Productive efficiency and allocative efficiency.
00:22
So with productive efficiency, essentially it means kind of it's impossible to produce more of one good without decreasing the quantity that is produced of another good and that's given you know the available inputs and technology for the economy given the inputs and tech available essentially productive efficiency like i said before means that it is literally impossible to produce more of ungood about decreasing the quantity of another good being produced that is our definition of productive efficiency, and then with allocative efficiency, essentially it means that the particular mix of goods being produced, that is the specific choice along the production possibilities curve, this particular combination of goods represents the allocation that society most desires.
01:38
So the particular combination of goods and services being produced on the, i'll just abbreviate the production possibilities curve as the ppc is the allocation, which is hence where allocative efficiency comes from.
02:13
This allocation is spelling, but essentially it's the allocation that is most desirable by society.
02:24
Now, what is most desirable by society? well, that is more of a philosophical question...