Efficiency

Efficiency is society mkaing optimal use of scarce resources to satisfy wants and needs - this links to the economic problem. How well a market allocates our scarce resources to satisfy customers. The market mechanism (the free market) can allocate inputs but sometimes the market fails.

• is concerned with whether we are producing the goods and services that match our changing needs and preferances and which we place the greater value on
• this is reached when no one ca be made better off without making someone else worse off (Pareto efficiency)

  If price rises as supply is restricted, increased profit for suppliers but decrease in consumer surplus so is not allocativley efficient 

• achieved when the output is produced at minimum average total cost
• when producers minimise wastage of resources in their production process

• occurs overtime 
• focus on changes in the amount of consumer choice available in markets together with the quality of goods and services available 

• when margianalised social benefit = marginal social cost
• maximising social welfare
• negative and positive externalities means the optimal level of consumption leading to some from the social optimum leading to some form of market faliure and a loss of social welfare 
• the price mechanism doesn't always take into account social costs and benefits of production 

 A private producer ignores the negative production externalities, and margianalises their own profits.