So what exactly is meant by the term economic efficiency? Well, according to Investopedia, economic efficiency is a state where every resource is allocated optimally so that each person is served in the best possible way and inefficiency and waste are minimized. While this is the general definition, some other factors are often used to describe this term. They are as follows:
1. Production of goods is at its lowest costs.
2. One person cannot be helped by means of reallocating the goods without making another person worse off.
3. It indicates that there has been a balance between loss and benefit.