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In economics there are two types of choices to be made.
When the decision to meet need X has been taken and we
are evaluating the most efficient way of meeting it - this is
called Technical or X efficiency evaluation. Economic evaluation
has a large part to play in such technical decisions.
When the many needs to be met have to be defined and we must
compare costs and benefits of each alternative - this is called
Allocative Efficiency evaluation.
Such decisions are rarely taken on economic grounds only
and choices are rarely made in an "all or nothing" context.
Usually we need to decide upon possible expansion or reduction of
current services. Any change in the quantity of resource used
will therefore have to be assessed from the current level. It is
therefore relevant to consider the changes in costs and benefits,
or incremental costs and benefits between the options. The margin
is the incremental variation in resources committed (inputs) that
is required to have a corresponding variation in effects (outputs).
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