Case study: Pepto Optimality

Pareto efficiency, also known as pareto optimality, is an economic state in which resources connot be redistributed to benefit one individual without harming atleast one other. Pareto efficiency means that resources are distributed in the most cost effective way possible, but it does not guarantee equality or justice. When no economic changes occur, an economy is considered to be in a Parero optimal state.

To simplify analysis and discussion the model for general equilibrium uses the two person, two goods and two resources (or 2x2x2 model). The investigation is done in 3 steps

• Consumption efficiency
• Production efficiency
• A combination of consumption and production efficiencies

Examine the concept of pareto optimality. Your discussion should include the above three steps

Answer rating: 100% (QA)

Pareto optimality also known as Pareto efficiency is a cornerstone concept in economics that signifies an allocation of resources where its impossible ... View the full answer