Economic Management Assignment help on : Efficiency in economics
In economics, efficiency means the production of a good at the cheapest possible price. Many organizations install various machineries and technologies so that they can manufacture the goods at a low price so that the benefits can be more. There are two types of efficiency in economics; one is the economical efficiency and the other is the technological efficiency. Economical efficiency means that a product is manufactured at the lowest possible price. Technological efficiency is said to be achieved when the inputs are lower than that of the outputs. Many organizations are investing a lot on technology so that they can reduce the input and increase the output. An organization which has achieved technological efficiency can achieve economical efficiency, for sure (Moffatt).
Production possibility curve basically states the point at which the production of two goods will be equally good. If an organization is into production of two goods then they should look for a point where the production of both the goods complements each other rather than that of effecting the sale of others.
Production of chocolates
Production of biscuits
In the above diagram, at one point, the increase in the production of chocolates will lead to decrease in the production of chocolates. As per production possibility curve, such a thing should be avoided so that the organization can benefit from both the products that they are producing. Hence, the second point can be considered as a production possibility curve as at that point, the biscuits and the chocolates are produced equally. Allocative efficiency can be stated as a point where the resources which are used, for the purpose of production, isn’t wasted. If an organization is willing to achieve allocative efficiency then they need to understand the wastages, that is happening in the production process. Many scholars state that an organization will have to produce goods at the lowest possible price and sell, the same, in the market at the highest possible so that they can achieve a greater profit margin. Productive efficiency deals with the production process rather than that of the goods which is being manufactured. As per productive efficiency, all the best products in the industry need to be used. The best and cheap labor needs to be used, the best technology and the economies of the scale should also be achieved. Dynamic efficiency deals with efficient use of resources in a timely manner as per the prevailing market. Dynamic efficiency gives a lot of importance to time. It believes that one needs to make smart investments so that they can be safe and secure in the future. Economy changes at regular intervals and due weightage needs to be given so that efficiency can be achieved with changing time (ieso).
Perfect competition is a market situation where a firm entering the market or a firm leaving the market won’t affect the sales on the market. In such a market, many firms will enter and hence, the profit of certain firms will be very less and at the same time, the older firms will be earning good amount of profit. Equilibrium will be achieved in the market when all the firms in the market will earn the same amount of profit (Cliffnotes).
Price, cost and revenue
Units of output
Monopoly is a market situation wherein one trader is present in the market for sale of a particular product. This is considered to be a very unhealthy situation because the trader will have all possible rights to rule the market. One of the major disadvantages is the pricing. These traders tend to price their product expensively thus, making it difficult for people to purchase it. It can be said that they will be the price maker thus, making it difficult for the buyer to negotiate on the price that has been decided by the trader. Imperfect monopoly also exists in the market. In this situation, the market will be having a substitute for the product. This will slow down the perfect monopoly which is prevailing in the market. Many times, government also decides to undertake monopoly and hence, they don’t allow other manufacturers and sellers in the industry (csu.edu).
Monopoly is considered to be very unhealthy because of the disadvantages that it offers. Monopoly forces the customers to use the products which have been produced by the manufacturer thus, any suggestions for them to make changes in the product will not be entertained. In the monopoly market, customers who cannot afford to pay will not be entertained because there are many buyers, who are willing to purchase it. There is a huge difference in the cost of manufacturing and the cost of sale. Monopoly doesn’t have any scope for technological improvement. The firm tends to relax because they know that technological efficiency may not matter much to them as there is no other competitor in the market (Missouristate.edu)
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