A socially inefficient outcome occurs when the allocation of resources in a market does not maximize overall societal welfare. This means that the distribution of goods and services is not optimal, resulting in a loss of efficiency.
Related terms
Market failure: Market failure refers to situations where the free market fails to allocate resources efficiently, leading to an inefficient outcome.
Deadweight loss: Deadweight loss is the economic inefficiency that occurs when there is a reduction in total surplus or welfare due to market distortions or inefficiencies.
Pareto improvement: A Pareto improvement is a change that makes at least one person better off without making anyone worse off. It represents an increase in overall social welfare.