🌟 1. Productive Efficiency
Meaning:
Productive efficiency happens when a company or economy produces goods using the least amount of resources (like time, money, and raw materials).
It means "no waste" in production.
Example:
Imagine a bakery can make 100 cakes a day using 5 workers.
If they find a way to make the same 100 cakes using just 4 workers and the same ingredients, they have become productively efficient — less input, same output.
In short:
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Best use of resources
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Lowest cost of production
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No one can produce more without using more resources
🌟 2. Allocative Efficiency
Meaning:
Allocative efficiency happens when the right amount of goods is produced as per people's needs or desires.
It means the economy produces what people actually want.
Example:
Suppose people in a town want more bread than cake. If the bakery spends more time making cake instead of bread, it is not allocatively efficient.
But if the bakery adjusts and starts baking more bread (what people want), it becomes allocatively efficient.
In short:
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Producing right goods in right quantity
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Matching supply with demand
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Consumer satisfaction is maximum
⚖️ Difference in One Line:
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Productive Efficiency = Make goods at lowest cost.
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Allocative Efficiency = Make right goods as per people's wants.
🔄 Both Together?
An economy is doing its best when it is:
✅ Productively efficient (no waste) AND
✅ Allocatively efficient (meeting people’s needs)