The economics is concerned about the efficient allocation of the
resources. An efficient allocation of the resources which tend to
be scarce can generate optimum welfare in the society. If the
allocation is inefficient then the marginal benefits received by
the people will be less than the marginal cost they have
paid.
Similarly, there is also possibility that some section of the
society might be getting higher marginal benefits by paying lesser
marginal cost or no cost at all.
A factory emitting pollution is the cost to the society. The
factory of the firm actually earning profit by not using clean
technology. The firm thus extracting extra benefits and this
situation is not socially efficient.
The scenario of inefficient allocation of resources is nothing but
the market failure in the economics.
Get Answers For Free
Most questions answered within 1 hours.