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Definition: Efficiency

Efficiency is basically the measure of the extent to which the effort, time or input cost is being well utilized for the intended task or function that needs to be completed. It is a measurable concept that can be quantified in relation to various terms. It shows the capability of an individual or an application to complete a specified amount of work at a specified level of performance with already pre-defined quantifiable amount of wastage or associated risk.

The higher the efficiency, the better capable that person or process or an application can be. However, the term “Effective” and “Efficient” are always confused with each other in terms of their usage and respective meanings. Effective basically refers to proper selection of things while efficient means doing things in a proper and efficient manner.

Efficiency is generally measured in the form of a ratio.

Efficiency = Amount of Valuable output generated / Amount of Valuable resources consumed

The higher will be this ratio, the higher will be the efficiency. Because of Law of Conservation of energy which states that energy can never be created nor be destroyed but can only be converted from one form to another, efficiency can never be more than 100%. Generally, the focus of every individual or process or an application is to maximize efficiency in order to enhance the optimum utilization of available resources in various forms.

In Physics, efficiency is defined as amount of useful work done or completed per unit of energy. It is denoted by ‘ƞ’. It is measured in various forms such as thermal efficiency, mechanical efficiency, electrical efficiency, radiation efficiency etc.

In economics, efficiency is defined as the extent to which the wastage has been reduced from the production process. In economics various forms of efficiency include market efficiency, allocative efficiency, business efficiency etc.

Efficiency of nature in terms of flora and fauna or efficiency of natural phenomenon is also measured to draw various kinds of conclusions.


Hence, this concludes the definition of Efficiency along with its overview.

Browse the definition and meaning of more terms similar to Efficiency. The Management Dictionary covers over 7000 business concepts from 6 categories. This definition and concept has been researched & authored by our Business Concepts Team members.

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