Efficiency

AAA

DEFINITION of 'Efficiency'

A level of performance that describes a process that uses the lowest amount of inputs to create the greatest amount of outputs. Efficiency relates to the use of all inputs in producing any given output, including personal time and energy.

INVESTOPEDIA EXPLAINS 'Efficiency'

Efficiency is an important attribute because all inputs are scarce. Time, money and raw materials are limited, so it makes sense to try to conserve them while maintaining an acceptable level of output or a general production level.

Being efficient simply means reducing the amount of wasted inputs.

RELATED TERMS
  1. Scarcity

    The basic economic problem that arises because people have unlimited ...
  2. Production Possibility Frontier ...

    A curve depicting all maximum output possibilities for two or ...
  3. Market Efficiency

    The degree to which stock prices reflect all available, relevant ...
  4. Raw Materials

    A material or substance used in the primary production or manufacturing ...
  5. Efficiency Principle

    An economic theory that states that the greatest benefit to society ...
  6. Efficiency Ratio

    Ratios that are typically used to analyze how well a company ...
RELATED FAQS
  1. What are some advantages of a market economy over other types of economies?

    A market economy is a system in which the economic decisions and the prices of goods and services are determined by supply ... Read Full Answer >>
  2. How do firms improve their employees' human capital?

    Human capital describes employees' knowledge, skill sets and motivation that provide economic value to a firm. It is important ... Read Full Answer >>
  3. Do production possibility frontiers have multiple possible equilibria?

    Production possibility frontiers involve the trade-off of inputs within an economy and can possess multiple possible equilibria. ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Measuring Company Efficiency

    Three useful indicators for measuring a retail company's efficiency are its inventory turnaround times, its receivables and its collection period.
  2. Active Trading

    What Is Market Efficiency?

    The efficient market hypothesis (EMH) suggests that stock prices fully reflect all available information in the market. Is this possible?
  3. Professionals

    Financial Efficiency: The Analyst's Guide To Time Management

    Being efficient on the job is the key to finding balance and avoiding burnout as a broker or advisor.
  4. Active Trading Fundamentals

    Efficient Market Hypothesis: Is The Stock Market Efficient?

    Deciding whether it's possible to attain above-average returns requires an understanding of EMH.
  5. Options & Futures

    Financial Concepts

    Diversification? Optimal portfolio theory? Read this tutorial and these and other financial concepts will be made clear.
  6. Economics

    The Nash Equilibrium

    Nash Equilibrium is a key concept of game theory, which helps explain how people and groups approach complex decisions. Named after renowned mathematician John Nash, the idea of Nash Equilibrium ...
  7. Investing Basics

    The Basics Of A Financial Analysis Report

    Running financial analysis on a company or industry is a key skill every investor must learn and understand how to undertake without which an ineffective financial report and investment recommendation ...
  8. Economics

    How Education And Training Affect The Economy

    Education and training benefit not only the worker, but also the employer and the country as a whole.
  9. Active Trading

    Viewing The Market As Organized Chaos

    Find out how a cat and a ladybug prove markets are both random and efficient.
  10. Active Trading

    Qualitative Analysis: What Makes A Company Great?

    To understand the qualities that make for a great company, investors must dig deep into "soft" metrics.

You May Also Like

Hot Definitions
  1. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  2. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  4. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  5. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  6. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
Trading Center