Productive efficiency
situation in which an economy cannot produce more of one good without sacrificing the production of another / From Wikipedia, the free encyclopedia
In economics, productive efficiency is a situation in which an economy is not able to produce any more of one good without reducing the production of another good. As resources are limited, it is not possible for more units of a good to be produced without taking away the resources used for producing another good. The concept of productive efficiency can be shown on a production possibility frontier (PPF), where all points on the curve are productively efficient.[1]
Productive efficiency refers to the maximum amount of output that an economy can produce at a certain point in time. However, if firms in the economy were to improve on their production methods and increase productivity, it is possible for the PPF to shift outwards, thus allowing more goods to be produced than before.
Productive inefficiency happens when factors of production (i.e. land, labor, capital or enterprise) are not used to its maximum. For example, labor in the form of workers may be sitting and not doing any work. If the worker were to be used to produce more output than before, then having the worker not doing any work would be productively inefficient.
Allocative efficiency is a special type of productive efficiency in which the right amount of goods is produced to benefit society in the best way.