Efficiency in production
Also called: Technical efficiency · Topic: Production Function, Returns and Costs · NCERT: Class 12, Ch 3 "Production and Costs"
Meaning
Efficiency in production means getting the most output possible from a given set of inputs. When a firm is efficient, it cannot get any more output from the same inputs. The production function assumes this, because it records only the maximum output for each input combination. Wasteful ways of producing are left out of it.
Example
A farmer with 4 hectares and 3 workers can harvest 40 quintals of wheat at most. If poor planning means the farm produces only 30 quintals, the farm is not efficient. The production function would still show 40, because it records the maximum.
Don't confuse with
- Least-cost combination: efficiency is about getting the most output from given inputs. The least-cost combination is about picking the cheapest input mix, at given input prices, for a given output.