見出し画像

Pareto efficiency and pareto efficiency improvement.

hi, this is Taka
today I will explain about 

Pareto efficiency means allocation is distributed without any waste. Usually if someone’s utility goes up, another’s utility is sacrificed. So, pareto efficiency does not consider weather someone's utility goes down or not. If allocation is distributed without any waste, it pareto efficiency.
For example, assume that allocation of sofa.
A and B are sitting on a sofa that is for two people is, of course, pareto efficiency.
If C is coming and tried to sit on that sofa, the utility of A or B is sacrificed. it seems that it is not pareto efficiency, but this is pareto efficiency. That is because allocation is distributed without any waste. Two people are sitting on a sofa that is for two people, then it is pareto efficiency. it does not consider the utility of A or B is sacrificed.
On the other hand, if only A is sitting on that sofa, it is not obviously pareto efficiency. there is one more space for a person. In short, if only A is sitting on the sofa, use of sofa is not efficient.

Compared to pareto efficiency, pareto efficiency improvement means when resource is distributed, it increases someone's utility without decreasing another's utility. For example, when the utility of A increases, B's utility does not decrease.
If I draw the graph representing "pareto efficiency improvement", you see below.


as you can see on this graph, within the area, nobody reduces utility.
it means pareto improvement.


この記事が気に入ったらサポートをしてみませんか?