Define or Explain the following concepts. 3) Economic efficiency

Define or Explain the following concepts.

3) Economic efficiency

ANSWER:

Economic efficiency can be defined as a situation in which welfare of the society is maximised. Microeconomics focuses on utilising scarce resources in a way that the public/social welfare is maximised. Economic efficiency involves attainment of efficiency along the following three aspects.

1. Production efficiency: It refers to producing the maximum amount of output from the available resources.

2. Consumption efficiency: It refers to distributing the produced goods and services among the various consumers in such a manner that the overall social welfare is maximised.

3. Overall economic efficiency: It refers to efficiency with regard to the production mix. In other words, it refers to producing that combination of goods and services that provide maximum satisfaction to the people.

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