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Economic Efficiency

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Encyclopedia of Quality of Life and Well-Being Research

Synonyms

Market-measured efficiency; Static and dynamic efficiency

Definition

Economic efficiency is a broad term typically used in microeconomics in order to denote the state of best possible operation of a product or service market. Economic efficiency assumes minimum cost for the production of a good or service, maximum output, and maximum surplus from the operation of the market. Economic efficiency is the sum, and outcome of, static efficiency and dynamic efficiency (Cabral, 2000; Church & Ware, 2000; Holmstrom & Tirole, 1989; Schmalensee, 1989; Tirole, 1989).

Description

Under the neoclassical economics tradition, economic efficiency is the sum and outcome of static efficiency and dynamic efficiency. Static efficiency occurs when a market operates under two conditions (Cabral, 2000; Church & Ware, 2000; Holmstrom & Tirole, 1989; Schmalensee, 1989; Tirole, 1989). In general, both conditions might be violated in the presence of externalities that lead to market failures. The first...

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Author information

Authors and Affiliations

  1. Department of Economics, University of Peloponnese, Thesi Sechi, Proin 4o Pedio Volis, 22100, Tripolis, Greece

    Anastasia Petrou

Authors
  1. Anastasia Petrou
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Correspondence to Anastasia Petrou .

Editor information

Editors and Affiliations

  1. University of Northern British Columbia, Prince George, BC, Canada

    Alex C. Michalos

  2. (residence), Brandon, MB, Canada

    Alex C. Michalos

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Petrou, A. (2014). Economic Efficiency. In: Michalos, A.C. (eds) Encyclopedia of Quality of Life and Well-Being Research. Springer, Dordrecht. https://doi.org/10.1007/978-94-007-0753-5_818

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  • DOI: https://doi.org/10.1007/978-94-007-0753-5_818

  • Publisher Name: Springer, Dordrecht

  • Print ISBN: 978-94-007-0752-8

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