Efficiency Flashcards
(9 cards)
What is Efficiency?
Efficiency is about a society making optimal use of our scarce resources to help satisfy changing wants and needs.
When does Allocative Efficiency occur?
Allocative efficiency occurs when the value that consumers place on a product (reflected in the price they are willing and able to pay) equals the marginal cost of factor resources used up in production.
What is X-Inefficiency?
When a firm is not operating at its optimal level of efficiency due to internal factors such as poor management, lack of motivation, and bureaucratic inefficiencies.
What is Productive Efficiency?
When a firm is producing goods or services at the lowest possible average cost, using the fewest possible resources.
• Firm produces the maximum output with the given inputs, without any waste or inefficiencies.
Productive efficiency is achieved at an output that minimises the unit cost (AC) of production
What is Dynamic Efficiency?
Achieving efficiency over time; it refers to ongoing innovation of products and production techniques and is all about long-term growth and development.
What is Product Innovation?
When companies invest in R&D and introduce new products or services to increase their competitive advantage, reduce costs, and improve the quality of their offerings.
What is Process Innovation?
The improvement of existing processes or the development of new ones to increase efficiency and productivity
E. g. automation
What is Static Efficiency?
The optimal allocation of resources at a specific point in time; optimising existing resources and processes, focused on efficiency and cost reductions
What is Dynamic Efficiency?
Efficiency over time i.e. the long-term allocation of resources and the potential for continuous improvement and adapting to changing conditions; emphasis
is on innovation, adaptability, and continuous improvement
