IB Economics SL 2.3.5 Allocative efficiency
IB Economics SL 2.3.5 Allocative efficiency
Students practise identifying allocative efficiency on diagrams and explaining its link to maximised social surplus and P = MC in competitive markets.
How this is tested
- identify allocative output where P = MC on a labelled diagram, for example 200 tickets
- explain why P = MC maximises social surplus with no welfare loss when externalities are absent
- evaluate how subsidies or price floors move output away from P = MC, reducing allocative efficiency