ALLOCATIVE EFFICIENCY
An economy is efficient if there is no way of reorganizing production and distribution to
improve everyone's satisfaction. Economists call such a state allocative efficiency_ When
people come to a market with goods they have produced, they trade their goods for those
of others. Every completed trade raises the satisfaction of both sides. When all of the
beneficial trades have been completed, no one can find another trade to improve his
situation. Under such conditions, the economy has attained allocative efficiency.