Question

Efficiency:

Paul Heyne's definition:

Efficiency = value of output / value of input

Note that this definition is subjective, incorporating value judgements.

Mateer's definition:

Efficiency: the property of a resource allocation of maximizing the total surplus received by all members of society.

Maximize: Total Surplus = Value to Buyers less Cost to sellers

Other concepts:

Allocative Efficiency - Producing the combination of goods and services that satisfies society's wants to the greatest degree.

Technical Efficiency - Producing goods and services for the least possible cost while maintaining full utilization of resources.

Assignment: Just let me know that you understand the basic ideas.

Answer 1

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Question:

Answer:

Efficiency:

Its a economic concept that measure the pick or highest level of performance that uses the least amount of inputs to achieve the highest amount of output. It means it measure, how efficiently use of input to produce output. minimum the ratio means higher efficiency and vice-versa. Minimum ratio of input and output means producing maximum amount of output at least amount of inputs and vice-versa.

It is a tool to measure the maximization of value. Value in respect of buyers, sellers or other stakeholders. Efficiency refers to how do we maximize our value. We maximize our value when i get more than what do i pay for the same.

Value = How much i get - how much i paid.

Efficiency = Marginal value add on - Marginal cost

Higher the difference means higher the values and vice-versa. Efficiency is use for value maximizing.  By increasing efficiency we save both time and money, thus making our businesses more profitable and as a customer get more value compare to cost. Efficiency maximize the utilization of resources because without  maintaining full utilization of resources we can not creat more value for the society. A right and efficient distribution of resources creat more more because of minimizing the cost and maximizing benefits.

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