Definition of Economics Efficiency
In economics, the term economic efficiency refers to the use of resources so as to maximize the production of goods and services.An economic system is said to be more efficient than another (in relative terms) if it can provide more goods and services for society without using more resources. In absolute terms, a situation can be called economically efficient if:
- No one can be made better off without making someone else worse off (commonly referred to as Pareto efficiency).
- No additional output can be obtained without increasing the amount of inputs.
- Production proceeds at the lowest possible per-unit cost.
These definitions of efficiency are not exactly equivalent, but they are all encompassed by the idea that a system is efficient if nothing more can be achieved given the resources available.
Another Definition for more clear Understanding.
Definition of 'Economic Efficiency'
A broad term that implies an economic state in which every resource is optimally allocated to serve each person in the best way while minimizing waste and inefficiency. When an economy is economically efficient, any changes made to assist one person would harm another. In terms of production, goods are produced at their lowest possible cost, as are the variable inputs of production.
Some terms that encompass phases of economic efficiency include allocational efficiency, production efficiency and Pareto efficiency.
Some terms that encompass phases of economic efficiency include allocational efficiency, production efficiency and Pareto efficiency.
Economists explains 'Economic Efficiency'
A state of economic efficiency is essentially just a theoretical one; a limit that can be approached but never reached. Instead, economists look at the amount of waste (or loss) between pure efficiency and reality to see how efficiently an economy is functioning.
Measuring economic efficiency is often subjective, relying on assumptions about the social good created and how well that serves consumers. Basic market forces like the level of prices, employment rates and interest rates can be analyzed to determine the relative improvements made toward economic efficiency from one point in time to another.
Measuring economic efficiency is often subjective, relying on assumptions about the social good created and how well that serves consumers. Basic market forces like the level of prices, employment rates and interest rates can be analyzed to determine the relative improvements made toward economic efficiency from one point in time to another.
