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Probably, for Econs one of the most basic term that most students will know is allocative efficiency.

Allocative efficiency is only achieved when resources are allocated to different uses in such a way that it is not possible to make anyone better off without making somebody worse off. It is possible for a firm to be producing its output very efficiently and yet be producing the wrong goods. Therefore it is important to produce the output that is most preferred by consumers.

I was on the bus yesterday whereby i thought of a rather weird scenario which illustrates this concept.

Lets say u are on a not very crowded bus. You decided not to take a seat and stand at the bus aisle. By doing so, you are not promoting allocative efficiency and putting a strain on the society hence adding on costs to the society. Don’t understand? Let me elaborate further.

If everyones acts the same and not sit, then it will reduce the optimal carrying capacity of the bus. With the same amount of fuel, the same amount of labour to operate the bus. Therefore much resources will be not optimized.

Think about the further things that might happen. People might be in the need to rush for jobs, or flights. Or even for some investments. Which will lead to more impacts, regardless socially and economically.

Haha. The above is just my 20cents point of view, please take it lightly.

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