POST 201 Chapter Notes - Chapter 14: Pareto Efficiency, Consumer Sovereignty, Self-Ownership
18 Jul 2016
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Document Summary
No inputs are wasted and a given level of output cannot be produced with fewer inputs. Firm use exactly the right mix of inputs to minimize the cost of producing a given output. Resources are allocated in such a way that it is impossible to make anyone better off without making someone else worse off. Management efficiency and production efficiency are necessary conditions for pareto efficiency. The concept refers to the absence of waste. If a situation is pareto inefficient, it is possible to improve the. Welfare of at least one person without harming anyone else. It would be wasteful not to do so. Pareto inefficiency means that potential improvement to human welfare is being wasted. The concept of pareto inefficiency is related to deadweight loss. Deadweight loss represents a net gain or surplus that could be generated, without harming anyone, by moving from the inefficient allocation of resources to the pareto efficient allocation.
