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od that the economy or many of the producers produce are those that are in very high demand. The aim of the producers or the economy is to reduce potential surplus of other goods produced. In Coeli and Coeli (2005, pp 57), the allocative efficiency is described as a measure to maximize on revenues and not necessarily on profits.

At point P2, the production of both commodity A and B is operating at the production possible frontier. At this point the economy is using all its resources to produce all the products that it can. This implies that no resources are underutilized and there is no single commodity that is sacrificed for another. All the commodities in the economy are left to the forces of the market and an ideal competition situation is expected. This is the point of productive efficiency and in some cases refered to as the productivity since it compares the ratios of inputs to outputs (Buchanan 1985, pp 6).

It is also possible to explain the concepts of distributive efficiency from the graphs above. Take for instance the points P3. At this point of the graph, the resources which are responsible for producing the commodity A are very minimal. Furthermore, the resources which are responsible for the production of substance B are many, and this leads to a high production of substance B. However, according to the principals that guide the concepts of diminishing marginal utility, this cannot be the case (Mukherjee, Mukherjee and Ghose, 2003, pp 49). This is mainly because, at the point when substance B has reached its maximum, and the development of the economy is less likely to improve, then the additional resources that emerge are to be used in other fields, and are not for production purposes (Coeli and Coeli, 2005). This implies that the more the resources they receive the more they are less likely to get utility from the same. Thus distribution is not fair in this case. In order to achieve distributive efficiency, the producer must avail just enough resources for production and not anymore to achieve distributive efficiency. Distributive efficiency therefore is described as a state in which the resources availed for purposes of production are not put into waste and is put towards the appropriate use (Jowsey, 2011, pp 21).

Section 2

This second section looks at the allocative inefficiency in the manufacturing industry in China. There has been a significant difference in income across different countries in the recent past. This has been attributed to the fact that different counties have different aggregate productivities. The cause of this phenomenon is attached to the fact that there could be a level of allocative inefficiencies that occur at some point. The following table gives a comparison of the total factor productivity gains of a number of countries in the manufacturing sector.

According to (Lashitew, n.d. 2015) the total factor productivity of China or India could improve by a margin ranging from about 30 to 60 percent. This study attributes this outcome to the fact that within these countries, there is a significant misallocation of resources within the manufacturing industry. It also singles out India as the other country with the potential to improve its performance. In the case of India the study identifies labor allocation as the main area for improvement.

Hsieh and Klenow (2008) explain that that in order to correct this pheno