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CARDINAL: A measurement based on a scale or quantitative numbers, such as 1, 5, or 357.2, that enables a comparison in magnitude. Comparability means, for example, that the difference between 5 and 2 is the same as the difference between 12 and 9. Measures such as height and weight use cardinal numbers. Most economic measures are based on cardinal numbers, including gross domestic product, unemployment rate, the price of chocolate, and the quantity of wheat produced. The benefit of cardinal measurement is the ability to directly compare one measure with another. If, for example, the price of chocolate is $1 a pound and the price of wheat is $4 a pound, then wheat is four times more expensive than chocolate. Ordinal measures, which involve relative ranking, is an alternative type of measure.
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                           INEFFICIENT: The state of resource allocation that exists when the highest level of consumer satisfaction is not achieved from available resources. This state occurs in market exchanges if the price buyers are willing and able to pay for a good does not reflect the satisfaction everyone obtains from the consuming the good or if the price sellers need to charge for a good does not reflect all opportunity cost of producing the good. An inefficient state of resource allocation means that society is not doing the best it can to address the scarcity problem. Available resources are not used to achieve the greatest possible satisfaction of wants and needs. Inefficient MarketsAn inefficient state occurs if the highest level of consumer satisfaction is not achieved from available resources. A market exchange achieves an inefficient state if the demand price does not reflect the satisfaction everyone obtains from consuming the good or if the supply price does not reflect all opportunity cost of producing the good.Under these circumstances, a market equilibrium equality between demand price and supply price does not achieve an efficient equality between the value (satisfaction) of the good produced and the value (satisfaction) of other goods foregone. Satisfaction can be increased by producing more of one good and less of another. EfficientIn contrast, a market exchange achieves an efficient state if the demand price reflects the satisfaction everyone obtains from consuming the good and the supply price reflects all opportunity cost of producing the good, that is, the satisfaction foregone.Market equilibrium, with equality between demand price and supply price, means the satisfaction obtained from the good is equal to the opportunity cost of production. In other words, the value (satisfaction) of the good produced is the same as the value (satisfaction) of other goods foregone. Satisfaction cannot be increased by producing more of one good and less of another. Markets and GovernmentThe two primary methods of resource allocation--markets and government--are also the two primary reasons for an inefficient allocation.- Markets: Markets can be inefficient "naturally," with no help from government, due to market failures. The primary market failures are public goods, market control, externalities, and imperfect information. In each of these cases, the "natural" market equilibrium equality between demand price and supply price does not generate an equality between the value of the good produced and the value of other goods not produced.
- Government: Governments can cause an otherwise efficient market to be inefficient through price controls and taxes. Price controls force prices above (price floor) or below (price ceiling) the equilibrium price. Taxes create a wedge between the demand price and the supply price. In each of these cases, the market is unable to achieve an equality between the demand price and supply price, and thus there is no equality between the value of the good produced and the value of other goods not produced.
Recommended Citation:INEFFICIENT, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2026. [Accessed: June 17, 2026].
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PINK FADFLY
[What's This?]
Today, you are likely to spend a great deal of time wandering around the downtown area looking to buy either a rechargeable battery for your computer or shoe laces for your snow boots. Be on the lookout for high interest rates.
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The first paper currency used in North America was pasteboard playing cards "temporarily" authorized as money by the colonial governor of French Canada, awaiting "real money" from France.
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"The secret of getting ahead is getting started. The secret of getting started is breaking your complex, overwhelming tasks into small manageable tasks, and then starting on the first one. " -- Mark Twain, writer
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CPI-W
Consumer Price Index-Urban Wage Earners and Clerical Workers
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