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| How is an allocation described? |
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Definition
An allocation is described by a specific set of
consumption levels,
input allocations,
output levels |
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| When is an allocation said to be "Pareto Optimal" or "Pareto Efficient?" (hint: Vilfredo Pareto (1848-1923) was an Italian economist). |
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Definition
| If production and distribution cannot be reorganized to increase one person's utility without reducing the utility of someone else. |
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| What is "Pareto-superior?" |
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Definition
| If U of at least one person is higher and that of no one else is lower. Even if not "Pareto Efficient." |
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Where does Pareto analysis stop short?
When can we not say much in terms of efficiency?
These limit the kinds of questions that can be answered. |
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Definition
Stops short of value judgements and interpersonal comparisons of utility.
If changes help some but harm others, we cannot say much in terms of efficiency.
These limit the kinds of questions that can be answered. |
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Term
| Give an example of how Pareto optimality may represent unfair condition. |
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Definition
| One person with all vs. all persons with equal satisfies efficiency condition (i.e. partial[V]/partial[c_i]>0 forEach i ; argument for either condition is an interpersonal comparison. |
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| a particular arrangement of resources, endowments, rewards, prices, etc. |
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| public good externalities |
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| e.g. bee farm next to apple farm |
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| pareto efficient pareto optimal contract curves, lagrangian |
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