What is meant by economic efficiency?

Economic efficiency refers to the optimal allocation of resources in a way that maximizes output while minimizing waste. This concept is grounded in the idea that resources, such as labor and capital, are limited and should be utilized in a manner that produces the greatest benefit for society. When resources are allocated efficiently, the economy is producing the maximum possible goods and services given the resources available.

Maximizing output means that every unit of input is being used to its fullest potential, contributing to overall production without unnecessary expenditures or inefficiencies. This principle also encompasses both productive efficiency, which focuses on producing goods at the lowest cost, and allocative efficiency, which ensures that resources are distributed according to consumer preferences and demand.

In contrast, elements like maximizing consumer choices or a balance between saving and spending, while relevant to economic considerations, do not encapsulate the broader concept of resource allocation and output maximization as effectively. Additionally, government control of all resources would typically lead to inefficiencies and lack of optimal resource allocation, which contradicts the principle of economic efficiency.