Learn about the comparison between Pareto optimality and welfare optimality. The Pareto optimality is necessary but not sufficient for welfare maximisation. We have seen that welfare maximisation occurs at some point on the GUPF where the GUPF is a tangent to an SIC. Therefore, since every point on the GUPF satisfies all the three conditions of Pareto optimality, Pareto optimality [...]
In this article we will discuss about:- 1. Introduction to Pareto Optimality 2. Efficiency in Production 3. Pareto Optimality in Production and Perfect Competition 4. Efficiency in Consumption or Exchange 5. Pareto Optimality in Consumption or Exchange and Perfect Competition 6. Pareto Optimality Conditions when the External Effects are Present and Other Details. Contents: Introduction to Pareto Optimality Efficiency in [...]
The following points highlight the two main conditions of Pareto optimality. The conditions are: 1. Efficiency in Exchange 2. Efficiency in Production. 1. Efficiency in Exchange: The first condition for Pareto optimality relates to efficiency in exchange. The required condition is that “the marginal rate of substitution between any two products must be the same for every individual who consumes [...]