Learn Before
Pareto Inefficiency as an Opportunity for Mutual Gain (MRS ≠ MRT)
Pareto Efficient vs. Pareto Inefficient Allocations
An allocation that is Pareto efficient is not necessarily better for every individual than any Pareto inefficient allocation. A person may prefer a specific inefficient outcome if it provides them with higher utility. For instance, while allocation 'L' is Pareto efficient, Angela is better off at the inefficient allocation 'N'. Moving from N to L would represent a welfare loss for her. This demonstrates that while moving from an inefficient point to a dominating efficient point is a mutual gain, not all efficient points are superior to all inefficient points from every participant's perspective.
0
1
Tags
Library Science
Economics
Economy
Introduction to Microeconomics Course
Social Science
Empirical Science
Science
CORE Econ
Related
Pareto Efficient vs. Pareto Inefficient Allocations
Potential for Pareto Improvement when MRS < MRT
Angela's Counter-Offer as a Win-Win Agreement (Pareto Improvement)
Pareto Inefficiency Example: Banana Plantations and Fishermen
Pareto Inefficiency of Private Choice Enables Mutual Gains