efficiency types

Question 1

define static efficiency

Answer 1

making the most efficient use of scarce resources at a specific given point in time
= measured by allocative and productive efficiency

Question 2

describe productive efficiency

Answer 2

producing goods at lowest possible average cost, using fewest factors possible and all FOP fully employed
= company can produce max output with given inputs wo waste
= achieved at output that minimizes the unit cost (AC) of production

Question 3

describe dynamic efficiency

Answer 3

improvement in productive efficiency over time (long term growth)
= ongoing adaptation and improvement of goods to meet changing demands
= eg new tech like AI revoltionized business operations

Question 4

how does innovation affect efficiency

Answer 4

improves dynamic efficiency
= creates new products= increase competitive advantage= reduce costs and increase quality of goods

Question 5

define process innovation

Answer 5

improve existing processes of new ones
= increase efficiency and productivity
= eg automation and tech

Question 6

define allocative efficiency

Answer 6

optimizing resource allocation to meet needs and wants at a price reflecting marginal cost of supply
= when it’s impossible to improve economic welfare by re-allocating resources between markets
= when there’s largest consumer and supply surplus