Activity 1(d)

Activity 1d: A link between food choices and efficiency

1.     Allocative efficiency occurs when society’s collective satisfaction is maximised. This occurs when it is not possible to make someone better off without making someone else worse off. This usually requires that technical efficiency be achieved first because this type of efficiency occurs when a society is able to maximise the volume of goods and services it can produce with the available resources. Allocative efficiency therefore looks at where resources are directed to meet needs and wants whereas technical efficiency looks more at how productively the goods and services are produced. 

2.    Poor food choices can, over time, contribute to avoidable health conditions. This means that days may be lost due to illness, workers might not be as productive or creative in the workplace and as a result it is not possible to maximise production using available resources. 

3.    Given that people are choosing those foods that maximise their wellbeing, it could be argued that allocative efficiency is being achieved. Some may believe that individual choice should be protected and as long as the individual is aware of the consequences of the choice, then they are free to choose those products that they believe will maximise their wellbeing. 

However, if the food choices lead to long term consequences that reduce technical efficiency (as discussed in Q2) then it might not be possible to achieve allocative efficiency. The maximum level of production may not be achieved. In addition, more scarce resources will need to be allocated towards the treatment of preventable diseases that could have been avoided if better food choices were made. 

4.    If too much sugary food is consumed in the current period, then intertemporal efficiency might suffer. While wellbeing may be maximised in the short term (the high associated with the consumption of sugar), in the long run, it is likely that obesity, diabetes, fatty liver and Alzheimer’s disease may be more prevalent. This means that in the long run allocative efficiency suffers and the current consumption of sugar leads to a lower level of collective satisfaction in the future. 

5.    Personal opinion – students might consider 

  •        Freedom of choice
  •        Comparisons might be made to industries such as alcohol and tobacco
  •        Addictive nature of sugary and unhealthy food
  •        Lack of awareness of consumers about the long term consequences
  •        Will save governments money in the long run if they intervene now
  •        May promote increased efficiency and wealth in long run
  •     Some industries will be losers if the government intervenes