Productive efficiency means it is impossible to produce more of one good without decreasing the quantity produced of the other. All choices along the PPF, including A, B, C, D, and F, display productive efficiency. Moving from any one of these points to another necessarily involves a trade-off: more Healthcare means less Education, or vice versa.
Point R lies inside the frontier and is productively inefficient. The economy at R is wasting resources or using them sub-optimally, so it could produce more of both goods. Comparing R to point C makes this clear: C has both more Education (\(E_2 > E_1\)) and more Healthcare (\(H_2 > H_1\)) than R, proving that R is wasteful.
Allocative efficiency goes further. It asks not just whether resources are fully employed, but whether the economy is producing the right mix of goods. Among all the productively efficient points on the PPF, allocative efficiency identifies the particular combination that society values most. Which point on the PPF is allocatively efficient depends on societal preferences: economics cannot prescribe this choice, but it can confirm that whatever is chosen should at least be on the frontier.
| Point | Education | Healthcare | Status |
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