Any economic resources are limited, and some of them, such as oil, land, metal ores, gas, coal, are not reproduced at all. Therefore, it is extremely important to use resources efficiently.
In the most general sense, economic efficiency is the ratio of costs to the results obtained. High efficiency is achieved with increased results relative to lower costs.
The results of economic activity are embodied in products that satisfy needs, and costs are directly related to the use of resources. Accordingly, economic efficiency can be determined by the following formula:
Production efficiency = the number of units of created products divided by the costs of production resources.
For example, using this formula, you can compare the efficiency of labor at two enterprises that produce the same products. At the first enterprise, 15 workers create 1200 units of the product, and at the second - 25 workers create 1800 units. According to the formula, the efficiency in the first case will be 1200/15 = 80 units, and in the second - 1800/25 = 72. It is learned that the first enterprise uses labor resources more efficiently.
Economic efficiency is general (absolute) and comparative.
Overall economic efficiency equals production profitability. The main indicator of profitability (or profitability) is the size of the profit, which falls on the unit cost.
Comparative economic efficiency is expressed in the coefficient of profitability, which is achieved for certain periods of time, for example, for a year or for a quarter.
In any business, the economic efficiency of the project is important. It is expressed in the company's ability to produce as many good quality products as possible with minimal cost and to sell these products at the lowest cost. Assessment of the economic efficiency of the project consists of several stages:
1) Analysis and assessment of investment costs - this is the calculation of the needs of the project in fixed and working capital, in financing at various stages of its development and investment cycle.
2) Analysis and assessment of current costs - this is the preparation of cost estimates, determining the current cost of products or services, profitability, capital productivity, profitability and financial payback of the project.
Economic efficiency can be evaluated for each resource separately, and for all resources in total.
If we substitute the number of workers who participate in production into the denominator of the given efficiency formula, we will get an indicator of labor productivity.
If the number of units of capital used (for example, machines) is taken into account, then the indicator of capital productivity can be calculated. And if land is used as capital for agricultural production, then we will talk about the calculation of productivity (that is, how much product was collected from one hectare).
To evaluate the effectiveness of all production resources, it is necessary to have indicators of the monetary measurement of all resources, adding them together, we will get the total costs.
The overall production efficiency directly depends on the maximum use of the attracted resources. Firms that use resources worse than their competitors will not be able to recover their costs at the price that has been established in the market. Accordingly, they will be forced to leave this sector of production. That is, economic efficiency is provided to a greater extent by a competitive market environment. Entrepreneurs are forced to look for more and more new ways to increase the efficiency of their projects by increasing the efficiency of using their production resources and reducing overall production costs.