Economic efficiency refers to the optimal use of resources to achieve the best possible outcomes. It occurs when goods and services are produced at the lowest cost and distributed in a way that maximizes overall satisfaction. In an economically efficient system, resources are allocated where they are most valued, ensuring that no additional gains can be made without making someone worse off. There are two main types of economic efficiency: allocative efficiency and productive efficiency. Allocative efficiency occurs when resources are distributed according to consumer preferences, while productive efficiency is achieved when goods are produced at the lowest possible cost. Together, these efficiencies contribute to a well-functioning economy.