engleski

Allocative efficiency and optimal adjustments of a producer

Inefficiency of the producer is the result of the inefficient use of technology and production planning which does not take into account market constraints. This article clearly describes the efficiency measures in different market circumstances. Special attention is given to the dual relationships that allow a description of the efficiency of the producer in different ways. Decomposition of the overall efficiency into the technical and allocative inefficiency enables distinguishing causes of inefficiency. We give the original economic interpretation of allocative efficiency which is the basis for determining the direction in which technology allows maximum savings and describing measures that a company should take.

technological and market constraints; technical and allocative efficiency; distance functions; economic savings; optimal adjustments of the production plan

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