The official business definition of cost efficiency versus cost effectiveness is an important distinction to understand. Cost efficiency is defined as the ratio of output to input, meaning that it is a measure of how much output is produced with a given input. Cost effectiveness, on the other hand, is defined as the ratio of output to cost, meaning that it is a measure of how much output is produced for a given cost. In other words, cost efficiency measures how efficiently a business is using its resources, while cost effectiveness measures how effectively a business is using its resources.
For example, a business may be cost efficient if it produces a large amount of output with a small amount of input. However, if the cost of the input is high, then the business may not be cost effective. On the other hand, a business may be cost effective if it produces a large amount of output for a low cost. In this case, the business is using its resources effectively, even if it is not using them efficiently.
Overall, cost efficiency and cost effectiveness are two important concepts for businesses to understand. Cost efficiency measures how efficiently a business is using its resources, while cost effectiveness measures how effectively a business is using its resources. By understanding the difference between these two concepts, businesses can ensure that they are making the most of their resources and maximizing their profits.