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In a pure exchange economy, if an allocation is Pareto efficient, it is impossible to have two people who prefer each other's consumption bundles to their own.
Pareto Efficient
An allocation of resources in which it is impossible to make any one individual better off without making at least one individual worse off.
Pure Exchange Economy
An economic model assuming no production, where agents trade existing goods and services, focusing on the allocation and distribution based on preferences.
Consumption Bundles
A combination of various goods and services chosen by a consumer based on their budget and the utility derived from the items.
- Acquire knowledge on the principles of Pareto optimality and its critical role in allocating economic resources.
- Investigate the effects of justice and envy in the decisions of distribution.
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Learning Objectives
- Acquire knowledge on the principles of Pareto optimality and its critical role in allocating economic resources.
- Investigate the effects of justice and envy in the decisions of distribution.
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