DSE 2004

[Anakin Skywalker]

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[Granpa Simpson]

For Q5 i think that both are Pareto efficient because in neither of the cases a transfer can be made such that at least one of the consumers is better off without changing the utility of the other..or in other words any such transfer will lead to either of the consumers being worse off for both the choices.

[Anakin Skywalker]

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[Granpa Simpson]

Use the definition of Pareto Efficiency rather than using the box diagram...a consumption bundle is said to be Pareto efficient if the utility of any one of the agents cannot be increased without decreasing the utility of others...in this case for both alpha and beta none of the two agents can be made better off without making the other worse off..so both are Pareto efficient..also the market is cleared...!!!!