Allocative efficiency occurs when resources are distributed in a way that maximizes the overall benefit to society. This means that goods and services are produced at levels where the price consumers are willing to pay equals the cost of producing them. In this state, no one can be made better off without making someone else worse off, which is known as Pareto efficiency. In a market achieving allocative efficiency, the production of goods aligns with consumer preferences. For example, if pizza is in high demand, resources will be allocated to produce more pizza rather than less desired items, ensuring that consumer needs are met effectively.