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Economic efficiency

Economic efficiency Definition

Economic Efficiency means the optimal use of resources in order to maximize the production of goods and services. A company or an economic system is more efficient if it can produce more  without using more resources. In microeconomics production is considered to be economically efficient when a unit of good is produced at the lowest possible cost. A situation is economically efficient if no additional unit can be produced without increasing the amount of inputs.

 


Additional meaning of Economic efficiency:

The term economic efficiency refers to the use of resources that 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.
  • No additional output can be obtained without increasing the amount of inputs.
  • Production proceeds at the lowest possible per-unit cost.


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