Pareto Efficient
Pareto efficient
Is it possible to make both parties happy without hurting any of them? Pareto efficient is mainly focused on this point and it struggles to make make both parties happy. Let's take a few examples here:
1) Let's think miss city and miss suburb both have their own apartments in different areas. Where miss city loves near to the centre of the city and expensive but she wants cheaper place. On the other hand miss suburb lives in the suburban area and she wants to live nearer to the center of the city. Here comes our Pareto improvement: Let miss city and suburb sell their house to each other!!!
2) Here comes the tricky question. There is a cake and we have mister A and mister 2. Answer the following questions whether it is pareto efficeint or not?
a) give the cake only to mister A
b) give the cake only to mister B
c) divide the cake and give it to both mister A and B
d) instead of throwing the cake divide the cake and give it to both mister A and B
The answer is all above.
Pareto improvement. a way to make two parties better off without making anyone else worse off.
Pareto efficient allocation: an allocation in which all voluntar trades have been carried out.
it is only concernd with the efficiency of the trade, whether all of the possible trades have been made. It does not have much to say about distrubition.
Is it possible to make both parties happy without hurting any of them? Pareto efficient is mainly focused on this point and it struggles to make make both parties happy. Let's take a few examples here:
1) Let's think miss city and miss suburb both have their own apartments in different areas. Where miss city loves near to the centre of the city and expensive but she wants cheaper place. On the other hand miss suburb lives in the suburban area and she wants to live nearer to the center of the city. Here comes our Pareto improvement: Let miss city and suburb sell their house to each other!!!
2) Here comes the tricky question. There is a cake and we have mister A and mister 2. Answer the following questions whether it is pareto efficeint or not?
a) give the cake only to mister A
b) give the cake only to mister B
c) divide the cake and give it to both mister A and B
d) instead of throwing the cake divide the cake and give it to both mister A and B
The answer is all above.
Pareto improvement. a way to make two parties better off without making anyone else worse off.
Pareto efficient allocation: an allocation in which all voluntar trades have been carried out.
it is only concernd with the efficiency of the trade, whether all of the possible trades have been made. It does not have much to say about distrubition.
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