Answer to Question #264519 in Microeconomics for Precious Ange

Question

What is a Pareto superior allocation?

When is an allocation said to be Pareto improving?

At what point is Pareto Efficiency reached?

Answer 1

The predominant efficiency concept in economics is Pareto optimality (or Pareto efficiency). This concept is based on two definitions. First, we say that an allocation A is Pareto superior to another allocation B if everyone is at least as well off under A as under B, and one or more are strictly better off under A.

A Pareto improvement occurs when a change in allocation harms no one and helps at least one person, given an initial allocation of goods for a set of persons.

Pareto efficiency is when an economy has its resources and goods allocated to the maximum level of efficiency, and no change can be made without making someone worse off.