Those aspects of efficiency concerned with obtaining the largest possible level of output for a given quantity of inputs, or using the smallest possible quantity of inputs to obtain a given output. This is efficiency in production. It is distinguished from efficiency in exchange, which is concerned with the distribution of outputs between different users, and the efficient choice of the set of outputs to produce. Technical efficiency is a necessary condition for the overall efficiency of the economy but it is not sufficient since an economy could be better off producing the right mix of goods by technically inefficient methods, than producing an unsuitable set of goods with complete technical efficiency.
|Reference: Oxford Press Dictonary of Economics, 5th edt.|