An example of economic efficiency can be illustrated through several types of efficiency. Productive efficiency occurs when a factory produces cars at the lowest possible cost using the best combination of labor and machines, for example a Toyota plant that produces a car for $20000 when competitors need $25000 is productively efficient. Allocative efficiency occurs when resources are allocated to produce what society wants most, for example if consumers want more electric vehicles than gasoline vehicles, shifting steel and labor from gas car production to electric car production increases allocative efficiency. Pareto efficiency can be shown by a trade where both parties benefit, for example if a farmer trades wheat for a tailor's shirts and both value what they receive more than what they gave up, the trade is Pareto efficient because both are better off without harming anyone. Market efficiency is seen when housing prices reflect all available information about location, size, and condition. A real world example is ride sharing, Uber improves economic efficiency by matching idle cars and drivers with people needing rides, reducing wasted time and fuel compared to taxis cruising for fares, thus using existing resources more efficiently to create value for both drivers and riders.
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