what is efficiency 
the term efficiency refers to the peak level of performance that uses the least amount of inputs to achieve the highest amount of output efficiency requires reducing the number of unnecessary resources used to produce a given output including personal time and energy efficiency is a measurable concept that can be determined using the ratio of useful output to total input increased efficiency minimizes the waste of resources such as physical materials energy and time while accomplishing the desired output investopedia yurle villegasunderstanding efficiencythe term efficiency can be defined as the ability to achieve an end goal with little to no waste effort or energy being efficient means you can achieve your results by putting the resources you have in the best way possible put simply something is efficient if nothing is wasted and all processes are optimized this includes the use of money human capital production equipment and energy sources efficiency can be used in a variety of ways to describe various optimization processes as such analyzing efficiency can help reduce costs and increase bottom lines for instance as noted above efficiency is measurable and can be expressed as a ratio or percentage you can measure it by using the following formula output or work output is the total amount of useful work completed without accounting for any waste and spoilage if you want to express efficiency as a percentage simply by multiplying the ratio by 100 efficiency measures any performance that uses minimal inputs to get the maximum number of outputs put simply you re efficient if you get more by using less types of efficiencyefficiencies can be divided into many different categories we ve outlined some of the key types below including economic efficiency market efficiency and operational efficiency economic efficiency refers to the optimization of resources to best serve each person in that economic state no set threshold determines the effectiveness of an economy but indicators include goods brought to market at the lowest possible cost and labor that provides the greatest possible output market efficiency describes how well prices integrate available information this means that markets are efficient when all information is already incorporated into prices there is no way to beat the market since there are no undervalued or overvalued securities available market efficiency was formalized in 1970 by economist eugene fama whose efficient market hypothesis emh states that an investor can t outperform the market fama also stated that market anomalies should not exist because they will immediately be arbitraged away operational efficiency measures how well profits are earned as a function of operating costs the greater the operational efficiency the more profitable the firm or investment this is because the entity is able to generate greater income or returns for the same or lower cost than an alternative in financial markets operational efficiency occurs when transaction costs and fees are reduced a historical lookbreakthroughs in economic efficiency often coincide with the invention of new tools that complemented labor including we also saw the emergence of efficiencies in time consider the factory system in which each participant focuses on one task in a factory line this system increased operational output while saving time many scientists developed practices to optimize specific task performance one famous example is the novel cheaper by the dozen by frank bunker gilbreth jr and ernestine gilbreth carey in the book gilbreth jr develops systems to maximize efficiency in even the most mundane tasks such as brushing your teeth the impacts of efficiencyefficiency is an important attribute because all inputs are scarce time money and raw materials are limited and it is important to conserve them while maintaining an acceptable level of output an efficient society is better able to serve its citizens and function competitively goods that are produced efficiently are sold at a lower price advances as a result of efficiency have facilitated higher standards of living such as supplying homes with electricity running water and giving people the ability to travel efficiency reduces hunger and malnutrition because goods are transported farther and quicker advances in efficiency also allow greater productivity in a shorter amount of time example of efficiencyindustry 4 0 is the fourth industrial revolution characterized by digitalization factory processes manufacturing and service industries are all more efficient thanks to more powerful computers cloud computing the industrial internet of things iot data analytics robotics artificial intelligence and machine learning for example data analytics can be applied in an industrial setting to inform factory or plant managers when machinery needs maintenance or replacement this predictive maintenance can substantially reduce operational costs 