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.
