efficency

• Productive efficiency = ATC is at its lowest
• Productive efficiency:


  MC = AC
• Allocative efficiency = welfare is maximised
• MC = AR= DEMAND
• X- inefficiency: firm is producing above AC for a given level of output
• Dynamic efficiency:


  Change in technology improves a firm output potential overtime.
• Dynamic efficiency:


  Innovations - R&D - supernormal profit to invest - enhance products develop new products
• Dynamic efficiency


  AR>AC
• Efficiency


  Society making to help satisfy changing wants and needs (optimal use of scarce resources)
• Productive efficiency 


  When a firm is producing goods or services at the lowest possible average cost, using the fewest possible resources
• Productive efficiency 


  Is achieved at an output that minimises the unit cost AC of production
• Dynamic Efficiency

  • product innovation
  • process innovation
  • creative destruction
• Static efficiency:


  Optimal allocation of resources at a specific point in time