What is Dynamic Efficiency?

This short revision video looks at aspects of dynamic efficiency in markets.

Dynamic efficiency occurs over time and is strongly linked to the pace of innovation within a market and improvements in both the range of choice for consumers and also the performance / reliability / quality of products.

Dynamic efficiency gains are often to be see in monopolistic competition and oligopolistic competition - in the latter case, where there are sufficiently large number of scaled businesses to earn and re-invest supernormal profits and where there are also many smaller firms perhaps better able to be innovative in niches within an industry.