Economic efficiency, as a rule, is the main integrated indicator of the success of business activities for any enterprise in any industry.
In its simplest terms, economic efficiency of production (EES) implies the ratio of the result achieved by the enterprise or firm to industrial and commercial activities and the costs incurred by the given firm or enterprise to achieve this result. The quantitative parameter of this ratio is called the indicator of economic efficiency and is defined as the relative performance of the entire economic system (here we mean the full production and commercial cycle for this particular enterprise). The relativity of the performance parameter is determined by the fact that its indicators are taken in comparison with the indicators of resource costs.
As an integral indicator, economic efficiency of production expresses the statistical sum of performance indicators at various levels of a given economic system (enterprise, firm) and acts as the aggregate final characteristic of economic activity (from a particular enterprise or even a unit, to the economy of the whole country). Moreover, as an integrated parameter, it also has the qualities of universality, that is, it characterizes with the same degree any efficiency factors, be it the economic efficiency of agricultural production, industrial, services, or the economic efficiency of livestock production.
At the level of microeconomic analysis, the EES is calculated as the ratio of the costs of final products to costs minus one. This calculation is similar at the macroeconomic level, only the country's total GDP is used as the first indicator. In addition, the calculations of individual factors of production — capital, personnel, land, and means of production — are very indicative . This allows a more detailed analysis of the situation at a particular enterprise or in the country as a whole and the formation of specific management decisions based on cumulative technology, that is, to focus investment and other resources on the weakest link in the economic process in terms of its effectiveness.
In global terms, the main criterion for social production is the level of satisfaction of people's needs for the necessary socio-economic benefits. The narrower and more specific in content to this criterion is the actual economic efficiency of production, which is characterized by a number of special parameters. The main of these parameters is such an important and widely used indicator as labor productivity, which expresses the quantitative side of production results in relation to time indicators. In addition to labor productivity, capital productivity parameters, production profitability and profitability and return on investment indicators characterize production efficiency in a very capacious manner.
It is generally accepted that such a method of production activity appears to be economically efficient in which compliance is achieved with the volume of manufactured products for a given specific volume of costs for its production. If the enterprise cannot maintain such volumes without attracting additional resources, then such production is considered inefficient. That is, economic activity with the lowest costs is effective.
In this context, the economic efficiency of production differs from technical efficiency, because it takes into account a much wider list of indicators, for example, such as the conformity of product quality to the requirements of the modern market or consumer demands.