Cost-efficiency Efficiency is the ratio of output to input. A system is cost ~fficient if, relative to another system, its outputs cost less per unit of input. A system increases its cost efficiency when it maintains output with a less than proportionate increase in inputs. Efficiency can conveniently be divided into two components: allocative efficiency is concerned with the allocation of given resources between alternative uses in ways that maximize social welfare; x-efficiency is concerned with producing more output without any change in the allocation of inputs. It therefore focuses on inefficiencies such as overstaffing and managerial waste.