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Allocative efficiency is a state of the economy in which production is aligned with the preferences of consumers and producers; in particular, the set of outputs is chosen so as to maximize the social welfare of society. [ 1] This is achieved if every produced good or service has a marginal benefit equal to the marginal cost of production.
Opportunity cost is the concept of ensuring efficient use of scarce resources, [ 25] a concept that is central to health economics. The massive increase in the need for intensive care has largely limited and exacerbated the department's ability to address routine health problems.
In economics, and in other social sciences, preference refers to an order by which an agent, while in search of an "optimal choice ", ranks alternatives based on their respective utility. Preferences are evaluations that concern matters of value, in relation to practical reasoning. [ 1] Individual preferences are determined by taste, need ...
Revealed preference theory was a means to reconcile demand theory by defining utility functions by observing behaviour. Therefore, revealed preference is a way to infer the preferences of individuals given the observed choices. It contrasts with attempts to directly measure preferences or utility, for example through stated preferences.
Newsvendor model. The newsvendor (or newsboy or single-period[ 1] or salvageable) model is a mathematical model in operations management and applied economics used to determine optimal inventory levels. It is (typically) characterized by fixed prices and uncertain demand for a perishable product. If the inventory level is , each unit of demand ...
The price mechanism is an economic model where price plays a key role in directing the activities of producers, consumers, and resource suppliers. An example of a price mechanism uses announced bid and ask prices. Generally speaking, when two parties wish to engage in trade, the purchaser will announce a price he is willing to pay (the bid ...
Lexicographic preferences. In economics, lexicographic preferences or lexicographic orderings describe comparative preferences where an agent prefers any amount of one good (X) to any amount of another (Y). Specifically, if offered several bundles of goods, the agent will choose the bundle that offers the most X, no matter how much Y there is.
v. t. e. An economic model is a theoretical construct representing economic processes by a set of variables and a set of logical and/or quantitative relationships between them. The economic model is a simplified, often mathematical, framework designed to illustrate complex processes. Frequently, economic models posit structural parameters. [ 1]