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Constrained Pareto efficiency is a weakening of Pareto optimality, accounting for the fact that a potential planner (e.g., the government) may not be able to improve upon a decentralized market outcome, even if that outcome is inefficient. This will occur if it is limited by the same informational or institutional constraints as are individual ...
Allocative or Pareto efficiency: any changes made to assist one person would harm another. Productive efficiency: no additional output of one good can be obtained without decreasing the output of another good, and production proceeds at the lowest possible average total cost.
Allocative efficiency is a state of the economy in which production is aligned with the preferences of consumers and producers; in particular, the set of outputs is chosen so as to maximize the social welfare of society. [1] This is achieved if every produced good or service has a marginal benefit equal to the marginal cost of production.
Efficiency notions: Pareto-efficiency, graph Pareto-efficiency (where Pareto-domination considers only exchanges between neighbors on a fixed graph), and group-Pareto-efficiency. An allocation X as k-group-Pareto-efficient (GPE k ) if there is no other allocation Y that is at least as good (by arithmetic mean of utilities) for all groups of ...
Pareto efficiency is achieved when the marginal rate of transformation (slope of the frontier/opportunity cost of goods) is equal to all consumers' marginal rate of substitution. Similarly, not all Pareto efficient points on the frontier are Allocative efficient. Allocative efficient is only achieved when the economy produces at quantities that ...
In this model, the state owns non-labor factors of production, and markets allocate final goods and consumer goods. The Lange model states that if all production is performed by a public body such as the state, and there is a functioning price mechanism, this economy will be Pareto-efficient, like a hypothetical market economy under perfect ...
An allocation is necessarily Pareto-optimal (NPE) if it is Pareto-optimal according to all responsive bundle-rankings consistent with the item-ranking (see Ordinal Pareto efficiency); An allocation is possibly Pareto-optimal (PPE) if it is Pareto-optimal according to at least one responsive bundle-ranking consistent with the item-ranking.
Barone, an associate of Pareto, proved an optimality property of perfect competition, [21] namely that – assuming exogenous prices – it maximises the monetary value of the return from productive activity, this being the sum of the values of leisure, savings, and goods for consumption, all taken in the desired proportions. [22]