Explain what is meant by allocative efficiency and Pareto optimality. Consider whether they are linked .

Allocative efficiency refers to when the bundle of goods being produced is an efficient bundle. Hence, if allocative efficiency is not being achieved then resources can be reallocated to produce a different bundle of goods which will allow someone to be better off whilst no one is made worse off. This can be illustrated on a production possibility curve, where the economy is on a point in the curve that is optimal. Allocative efficiency also occurs where price equals marginal cost (P=MC) which means there is production of goods and services according to the demand and supply of the economy. {the diagrams will be illustrated below for a better understanding}.Pareto optimality states that it is impossible to make some one else better off without making someone else worse off. Thus, Pareto optimality and allocative efficiency are linked as being on an optimal point on the PPC (condition for allocative efficiency) basically means that it is impossible to move to another point on that boundary and make someone better off without making anyone else worse off.