What is economic efficiency?

Whenever we talk about economics, we basically want to solve this problem:

  1. Unlimited wants
  2. Limited resources
  3. Alternative uses of resources

So efficiency of an economy means how that economy uses those scarce resources in order to satisfy human wants in a manner as optimum as possible.

Obviously, if a country uses its resources in a best possible way, it should should lead to its citizens being more well-off than before.