Enter the marginal costs ($) and the price ($) into the calculator to determine the Allocative Efficiency. 

Allocative Efficiency Formula

The following formula is used to calculate the Allocative Efficiency. 

Ea = MC/P *100
  • Where Ea is the Allocative Efficiency (%)
  • MC is the marginal costs ($) 
  • P is the price ($) 

To calculate the allocative efficiency, divide the marginal costs by the price.

How to Calculate Allocative Efficiency?

The following two example problems outline how to calculate the Allocative Efficiency.

Example Problem #1:

  1. First, determine the marginal costs ($). In this example, the marginal costs ($) is given as 35.
  2. Next, determine the price ($). For this problem, the price ($) is given as 40.
  3. Finally, calculate the Allocative Efficiency using the equation above: 

Ea = MC/P *100

Inserting the values from above and solving the equation: 

Ea = 35/40 *100 = 87.5 (%)

Example Problem #2: 

Using the same process as above, first define the variables required by the formula. In this case, these values are:

marginal costs ($) = 60

price ($) = 80

Entering these values yields:

Ea = 60/80 *100 = 75 (%)