Difference between revisions of "Efficiency"
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| − | "Efficiency" is an economic term that | + | "Efficiency" is an economic term that implies optimal production/consumption of all goods. |
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| + | Pareto efficiency defines the optimal state as one wherein no one can be made better off without someone being made worse off. | ||
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| + | Kaldor-Hicks efficiency defines the optimal state as one wherein all marginal benefits divided by respective prices are equal. (That is, no transfer of production inputs between goods will achieve a better outcome.) | ||
[[Category:Economics]] | [[Category:Economics]] | ||
Revision as of 03:50, March 29, 2007
"Efficiency" is an economic term that implies optimal production/consumption of all goods.
Pareto efficiency defines the optimal state as one wherein no one can be made better off without someone being made worse off.
Kaldor-Hicks efficiency defines the optimal state as one wherein all marginal benefits divided by respective prices are equal. (That is, no transfer of production inputs between goods will achieve a better outcome.)