Efficiency:
Paul Heyne’s
definition:
Efficiency
= value of output / value of input
Mankiw’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.