Question

Information Problem E: Use the definitions of efficiency and equity provided by your instructor to decide if the following statements relate to efficiency or equity Explain your answer questions 14 1&, If you decide the statement refers to efficiency, decide If t s alocative or productive efficiency Hint Eticiency has two parts productive and allocative. Equity in the text is defined as fair access to goods and services Question 14 (5 points) 14A person goes to the grocery store to buy their favorite bread and finds the store is sold out. (5 points)

Answer 1

14. Allocative efficiency because it is a problem of allocation, i.e. a person does not get what they want and are willing to pay for it. Allocative efficiency is achieved when production represents consumer preferences. Since the store is all sold out, it reflects that perhaps less of the good is being produced than what is required.

15. This is a case of productive efficiency. This is becasue the queue hoppers ruin the ability of a system to function well. This is sometimes also known as x-inefficiency. If everyone stood in their own queue, the results would be much quicker. The system is working less than efficiently in this case.

16. This is a case of equity. To able to achieve fair access to goods and services, a person could ask for a raise. If a person's income is less than what they need to spend, it implies that they are being deprived of goods and services.

17. This is a case of allocative efficiency. It means that resources are not set to their ideal levels. People are recieving higher wages or prices than the equilibrium level, implying distortion in the system. Resources are not allocated properly.

18. This is a case of equity because when the budget is reduced, people who relied on food stamps will not get access to food anymore. Their ability to attain access would diminish to a great extent.