Microeconomics
Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Chapter 19, Problem 8IP
To determine

The reason why individual prefers an optimal outcome.

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In economics, we assume that choices are based on desired outcomes. This concept is known as:
Can you explain the Pareto principle
Pareto efficiency, or Pareto optimality, is an economic state where resources cannot be reallocated to make one individual better off without making at least one individual worse off. Pareto efficiency implies that resources are allocated in the most economically efficient manner, but does not imply equality or fairness. An economy is said to be in a Pareto optimum state when no economic changes can make one individual better off without making at least one other individual worse off.To simplify analysis and discussion the model for general equilibrium uses the two person, two goods and two resources (or 2 X 2 X 2 model). The investigation is done in three steps:• Consumption efficiency • Production efficiency• A combination of Consumption and Production efficiencies.   Critically analyze the concept of Pareto efficiency. Use relevant theory and diagrams to support your analysis.
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