Question

What is meant by the term economic efficiency? Explain how voluntary exchange leads to an efficient solution.

Answer 1

Economic Efficiency is defined as an efficient or optimal use of the resources available to a firm/ business/ organisation/ industry in an economy, this concept talks about the sustainable use of the resources in order to avoid overuse, wastage, and degradation of the resources, and make it available to the future generations by understanding there future needs.

Voluntary Exchange of the resources is the most efficient way of utilising the resources, it avoids unnecessary labour costs, acquiring costs, collecting costs etc. From the historic point of view the early civilizations like aztecs use voluntary exchange methods like barter system, thus fulfilling the needs of everyone, in the modern times this methods is been evolved by evolution in this exchange system, this exchange in terms of money value, digital currencies, and the latest crypto currencies are the efficient methods determining the free trade across the corners of the world, thus helping in efficient uilization of the resources.

The current trade trends like e-commerce, online shopping, digital marketing, digital advertisements are the powerful tools that help to create awareness amoung the people across the world, different domains, products and needs are analysed and are fulfilled by various service sector industries thus supporting the efficient and sustainable use of the resources.