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What is economic efficiency?
Member rating: No Rating | Words: | Submitted: Tue Sep 23 2003
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What is economic efficiency? Economic efficiency can be defined as when an economic system is doing well, thus using scarce resources in the most effective way in order to meet the highest level of wants. If resources are being used in the best possible way, then this implies that three different types of efficiency are being achieved - productive efficiency, allocative efficiency and parato efficiency. Productive efficiency is using the least possible amount of scarce resources to produce a particular product, or producing the maximum quantity at the lowest possible cost. E.g. Providing a bus service with the lowest possible costs, i.e. the cheapest buses, petrol etc. This can be shown on a graph of total cost curves for a firm or industry. Production must take place at the lowest point on the lowest possible cost curve, so the maximum quantity is being produced using the lowest possible cost techniques,...
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