Economic efficiency concepts Term Paper Example | Topics and Well Written Essays - 1500 words

Economic capability concepts - Term Paper Exampleprofit. This is basically a study of factors which affect economic decisions of individuals, households and business enterprises in specifically outlined markets.In view of these, a relevant topic encompassing economics at the abovementioned level is the concept of economic efficiency. Economic efficiency is normally specify as a proportion of the quantity of some measure of outfit to the quantity of input required to bring it about. In economic theory, the desired output of economic activity is taken to be an increase in brotherly utility, and the input required is some combination of the productive resources of land, labour and capital. (The Citizens Compendium 2009) copious efficiency is the optimum combination of resources required to produce a given output at a given state of technology at which the ratio of their marginal products to their marginal costs are equal, because otherwise output could be increased at a given level of cost by increase one input and reducing another. (ibid. par. 5)On the other hand, allocative efficiency means that resources are allocated optimally between two outputs when the ratios of their marginal social utilities to their marginal social costs are equal - because social utility could otherwise be increased by switching resources from one output to the other. (ibid. par. 6)Finally, distribution efficiency is achieved when each consumers margin rate of substitution of one product for the other is the very(prenominal) as that of the other consumer that is to say when the ratio of the marginal utilities of the two products is the same for the two consumers, because otherwise they could gain from a swap (ibid. par 7).According to Schneck (2007), the criterion for economic efficiency is value. A diverge that increases value is an efficient change and any change that decreases value is an inefficient change. He further averred that value is subjective meaning, it differs depend ing on the perception of the