7.3 Market Efficiency

7.3 a. The Benevolent Social Planner

Economic efficiency implies an economic state in which every resource is optimally allocated to serve each individual or entity in the best way while minimizing waste and inefficiency. ^[9]

Example: Suppose a clothing factory has several machines to help sew the clothing. The machines can produce enough clothing that when sold could result in $100, $75, and $50. In this example, the most efficient option is the one that results in $100. Anything less than $100 is considered an inefficient use of the machines. ^[10]

^{Economic Efficiency [11]}

Economic equality or equity is the situation in an economy in which the apportionment of resources or goods among the people is considered fair. ^[12]

Example: Income Inequality: between 1979 and 2007, household income increased 275 percent for the richest 1 percent of household, it rose 65 percent for the top fifth but the bottom fifth only increased 18 percent. ^[13]

^{Economic Equality [14]}