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Economic efficiency

AnalyticsTrade Team
AnalyticsTrade Team Last updated on 26 Apr 2023

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Economic Efficiency

Economic efficiency is a concept that describes how well a system produces desired output with a given set of inputs and available technology. It is a measure of the relative efficiency of an economic system in allocating resources to produce the maximum output with the minimum of inputs. It is a measure of the cost-effectiveness of a given economic system in producing a given output. Economic efficiency is an important concept in economics and is used to evaluate the performance of an economy or a particular market.

History of Economic Efficiency

The concept of economic efficiency has been around since the early days of economics. Adam Smith, the father of modern economics, wrote about the concept of economic efficiency in his book The Wealth of Nations. He argued that economic efficiency was the key to economic growth and prosperity. In the 19th century, economists such as Alfred Marshall and Leon Walras developed the concept of economic efficiency further. They argued that economic efficiency was the result of the efficient allocation of resources in an economy. In the 20th century, economists such as Paul Samuelson and Kenneth Arrow developed the concept of economic efficiency further, introducing the concept of Pareto efficiency.

Comparison of Economic Efficiency

Inputs Outputs Efficiency
Labor Goods High
Capital Services Low

Summary

In summary, economic efficiency is a measure of the cost-effectiveness of a given economic system in producing a given output. It is an important concept in economics and is used to evaluate the performance of an economy or a particular market. For more information on economic efficiency, you can visit websites such as the World Bank, the International Monetary Fund, and the Organization for Economic Cooperation and Development.

See Also

  • Pareto Efficiency
  • Marginal Cost
  • Marginal Benefit
  • Opportunity Cost
  • Production Possibility Frontier
  • Allocative Efficiency
  • Productivity
  • Cost-Benefit Analysis
  • Price Elasticity of Demand
  • Price Elasticity of Supply

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