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RESOURCE QUANTITY, AGGREGATE SUPPLY DETERMINANT: One of three categories of aggregate supply determinants assumed constant when the short-run and long-run aggregate supply curves are constructed, and which shifts both aggregate supply curves when it changes. An increase in a resource quantity causes an increase (rightward shift) of both aggregate supply curves. A decrease in a resource quantity causes a decrease (leftward shift) of both aggregate supply curves. The other two categories of aggregate supply determinants are resource quality and resource price. Specific determinants falling into this general category include population, labor force participation, capital stock, and exploration. Anything affecting the quantity of labor, capital, land, and entrepreneurship is also included.

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TECHNICAL EFFICIENCY:

Obtaining the greatest possible production of goods and services from available resources. In other words, resources are not wasted in the production process. This is also considered as engineering efficiency and should be contrasted with economic or allocative efficiency.
Technical efficiency means that natural resources are transformed into goods and services without waste, that producers are doing the best job possible of combining resources to make goods and services. There is no waste of material inputs. There are no workers standing idly around waiting for spare parts. The maximum amount of physical production is obtained from the given resource inputs. In essence, production is achieved at the lowest possible opportunity cost.

Technical efficiency is a prerequisite for allocative or economic efficiency. Economic efficiency is achieved if the highest possible level of satisfaction is obtained from given resources. Because satisfaction is derived from consuming goods and services, economic efficiency requires the greatest possible level of production, that is, technical efficiency.

However, while technical efficiency is necessary for economic efficiency, it does not guarantee economic efficiency. While technical efficiency might be achieved in the production of purple spotted stuffed animals, allocative efficiency is not achieved if no one actually wants purple spotted stuffed animals and they remain stored in a big purple warehouse.

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Recommended Citation:

TECHNICAL EFFICIENCY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2021. [Accessed: November 29, 2021].


Check Out These Related Terms...

     | production possibilities | technology | production | efficiency | economic efficiency | consumer sovereignty | satisfaction | full employment | opportunity cost |


Or For A Little Background...

     | good | service | allocation | resource allocation | scarcity | limited resources | unlimited wants and needs | economic goals | factors of production | economic thinking |


And For Further Study...

     | distribution standards | economic system | seven economic rules | three questions of allocation |


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