Answer to Question #304954 in Economics of Enterprise for esha

Question

Critically analyze the concept of Pareto efficiency. Use relevant theory and diagrams to support your analysis

Answer 1

Pareto optimal theory (also referred to as Pareto efficiency) is a standard often used in economics that describes a situation where no further improvements to society's well being can be made through a reallocation of resources that makes at least one person better off without making someone else worse off.

This can be explained by the diagram below;