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© 2009 Pearson Education, Inc. Publishing as Prentice Hall   Principles of Economics 9e by Case, Fair and Oster

Allocative Efficiency and Competitive Equilibrium

Efficient Distribution of Outputs among Households

We all know that people have different tastes and preferences and that they will buy very different things in very different combinations. As long as everyone shops freely in the same markets, no redistribution of final outputs among people will make them better off. If you and I buy in the same markets and pay the same prices and I buy what I want and you buy what you want, we cannot possibly end up with the wrong combination of things. Free and open markets are essential to this result.

The Efficiency of Perfect Competition

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