Hi Ma'am, can we apply this logic to free markets and say free markets are productively efficient and allocatively efficient as well so equilibrium in free markets assuming we have perfect competition (assuming we idealise it) is Pareto efficient??
Yes! That’s all correct ✅😀 if we assume all of the things you mention, then perfect competition is Pareto efficient. You might learn about the “first fundamental theorem of welfare economics” if you ever do intermediate economics, which shows just this point. Well done!!!
Hello ma'am please help me with this case as well : There are three Points A,B,C on a Pareto frontier and it has been asked to draw a point like D such that A and B are pareto preferred to D but C is not. Please help me it's urgent.
It will be the same sort of analysis. You will have to find a point of production where both points A and B, in comparison, do 'better' in the sense that you re making more of at least one good and not less of either. And this point has to be such that production level C in comparison does not produce as much of at least one of the goods. You can draw the horizontal and vertical lines up and across from that point, to see that the area in-between those lines encompasses A and B but not C.
Hello , please tell me that if there are three points A,B,C which are on the frontier. And it is asked to draw a point D which is Pareto preferred to A and B but not to C then where will it lie?
I think I understand, though I'm not sure. Take point A and trace two lines, one perfectly straight up from point A and also one perfectly horizontal, to the right of point A. The area that is bounded by these two lines shows us points that are Pareto preferred to point A, since in this area we are producing more of at least one of the goods, and never less of either good. Do this for all three points. You should be able to find some level of production where the area of Pareto preferred options overlaps for A and B, but not C. At this point, compared to A and B you will be making more of at least one of the goods (and never less of either), but, compared to point C, you will be making less of at least one of the goods, hence not a Pareto improvement from C, but from A and B, yes.
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Thanks for watching! Good luck with your studies! 😊😊
Hi Ma'am, can we apply this logic to free markets and say free markets are productively efficient and allocatively efficient as well so equilibrium in free markets assuming we have perfect competition (assuming we idealise it) is Pareto efficient??
Yes! That’s all correct ✅😀 if we assume all of the things you mention, then perfect competition is Pareto efficient. You might learn about the “first fundamental theorem of welfare economics” if you ever do intermediate economics, which shows just this point. Well done!!!
thank you so much. Your videos help me pass my courses@@econhelp_official
Hello ma'am please help me with this case as well : There are three Points A,B,C on a Pareto frontier and it has been asked to draw a point like D such that A and B are pareto preferred to D but C is not.
Please help me it's urgent.
It will be the same sort of analysis. You will have to find a point of production where both points A and B, in comparison, do 'better' in the sense that you re making more of at least one good and not less of either. And this point has to be such that production level C in comparison does not produce as much of at least one of the goods. You can draw the horizontal and vertical lines up and across from that point, to see that the area in-between those lines encompasses A and B but not C.
Hello , please tell me that if there are three points A,B,C which are on the frontier. And it is asked to draw a point D which is Pareto preferred to A and B but not to C then where will it lie?
I think I understand, though I'm not sure. Take point A and trace two lines, one perfectly straight up from point A and also one perfectly horizontal, to the right of point A. The area that is bounded by these two lines shows us points that are Pareto preferred to point A, since in this area we are producing more of at least one of the goods, and never less of either good. Do this for all three points. You should be able to find some level of production where the area of Pareto preferred options overlaps for A and B, but not C. At this point, compared to A and B you will be making more of at least one of the goods (and never less of either), but, compared to point C, you will be making less of at least one of the goods, hence not a Pareto improvement from C, but from A and B, yes.
Thankyou for responding ❤️