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Energy Efficiency Vs. Economic Efficiency

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Engineers at a national research laboratory built a prototype automobile that could be driven 180 miles on a single gallon of unleaded gasoline. They estimated that in mass production the car would cost $60,000 per unit to build. The engineers argued that Congress should force U.S. automakers to build this energy-efficient car.

Is energy efficiency the same thing as economic efficiency? Explain.

Under what circumstances would the energy-efficient automobile described here be economically efficient?

If the goal of society is to get the most benefit from its limited resources, then why not ignore economic efficiency and build the energy-saving automobile?

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Solution Summary

Briefly describes difference between energy and economic efficiency.

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Energy efficiency is not same as economic efficiency. Energy efficiency is only related to one input in the production process (in this case gasoline) to the output generated by that particular process whereas economic efficiency takes into account the total costs that needs to be incurred to produce a certain value. In this particular case, the ...

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Sheetal Jain, PGDM
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  • BComm, University of Delhi
  • Post Graduate Diploma in Management (Equivalent to MBA), All India Management Association
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