Market Efficiency Flashcards
What is productive efficiency?
Productive efficiency is when a business is able to produce their goods or service at the lowest possible cost effectively.
What is allocative efficiency?
Allocative efficiency is when a business allocates all of their resources in the most effective and productive way.
What is dynamic efficiency?
Dynamic efficiency is when a business has productive efficiency over a long period of time, optimal rate of innovation and investment in the firm to increase production.
How does dynamic efficiency contribute to growth in the economy?
Dynamic efficiency increases innovation and creates a more efficient market. This increase in efficiency will move the PPC outwards, leading to economic growth. It gives the community access to a range of goods and services and leads to the improvement of allocative and productive efficiency over time.
