Pareto Efficiency?

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Alcohol5%

Can someone please explain this for me?

when it is not possible to make someone better of without making someone else worse off.

I.e. both productive and allocative efficiently acheivd cos u cant produce anymroe using resources wihtout divertnighg them away from osmewehre else (productive). And you are producing what society wants using societies resources at P=MC (allocative). If P>MC then satisfaction would be greater than the cost and so you could make people bettter of by riasing output. If P<MC then vice versa

Reply 2

Alcohol5%

I'm not sure about the P=MC

Reply 3

spurs123

Alcohol5%

I'm not sure about the P=MC

look it up lol but basically:

P represents utility/satisfaction.

MC- marginal cost

is satissfaciton is greater than marginal cost than by increasing production u add more to satisafacion than to cost...so are amking someone better off

and vice vers

Reply 4

Alcohol5%

zip it123

is satissfaciton is greater than marginal cost than by increasing production u add more to satisafacion than to cost...so are amking someone better off

so in that scenario where P>MC, increasing production u make someone better off, this is also not allocative efficiency as well as not pareto efficiency?

Reply 5

Drogue

When P=MC, it's pareto efficient.

Reply 6

Alcohol5%

So just to get this right...

Productive Efficiency is when you produce everything at the lowest possible cost?

Allocative Efficiency is when you produce the thing that is demanded the most, and produce a lot of it by allocating resources in the best possible way.

Pareto Efficiency is efficiency because you cannot, for example trade, make someone better off without making someone worse off?

Does this mean that because people do trade, and buy things, we are never at pareto efficiency?

Reply 7

Drogue

Alcohol5%

so in that scenario where P>MC, increasing production u make someone better off, this is also not allocative efficiency as well as not pareto efficiency?

Yes. You can make someone better off as the amount someone values that product (P) is higher than the cost of producing it. Selling one extra good for a price below P but above MC would make both parties better off. If that is possible, it's not allocative efficient nor pareto efficient.

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