The definition of cost effective is something that is a good value, where the benefits and usage are worth at least what is paid for them. As an example when we plan to talk to someone in outside country for a long period you need to chose which is the cheapest mode say skype... etc. and plan accordingly.
Economical in terms of the goods or services received for the money spent
producing good results for the amount of money spent; efficient or economical
Cost-effectiveness analysis (CEA) is a form of economic analysis that compares the relative costs and outcomes (effects) of two or more courses of action. Cost-effectiveness analysis is distinct from cost-benefit analysis, which assigns a monetary value to the measure of effect. Cost-effectiveness analysis is often used in the field of health services, where it may be inappropriate to monetize health effect. Typically the CEA is expressed in terms of a ratio where the denominator is a gain in health from a measure (years of life, premature births averted, sight-years gained) and the numerator is the cost associated with the health gain.The most commonly used outcome measure is quality-adjusted life years Cost-utility analysis is similar to cost-effectiveness analysis. Cost-effectiveness analyses are often visualized on a cost-effectiveness plane consisting of four-quadrants. Outcomes plotted in Quadrant I are more effective and more expensive, those in Quadrant II are more effective and less expensive, those in Quadrant III are less effective and less expensive, and those in Quadrant IV are less effective and more expensive.(wikipedia)
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