Pareto Efficiency - June 20

[Amit Goyal]

June20_ParetoEfficiency.png

[r]

(i) PPF will be a kinky curve intersecting at two given technologies ...it will be like a max function.To
produce both goods we will use min technology

(ii) (a)(50;50)

     (b)(40;60)
(iii) (50,50)

[mukund sharma]

hey @r
i feel u are genius in these topics and giving the answers but can u please explain me how did u start the following problem
please help me as it may help me for my DSE

[Amit Goyal]

That's right.
1. max{3y(1) + 3y(2), 4y(1) + 2y(2)} = 300 is the PPF.
2. (i) (50, 50)
(ii) (40, 60)
3. This answer is incorrect.

[n.saish]

Hey how did you get 3rd answer as (50,50)?
What I did was :
Drew the contract curve x2=(2/3)x1
As all points on it constitute pareto efficient allocations, its intersection with the production curve would also be a pareto efficient allocation.
So solving x2= (2/3)x1 and 2y1+y2=150 we get (375/8,225/4).
This point lies on the max. production fn line and is a pareto efficient allocation.
Now we can find the prices for competitive eq....

[r]

then sir is the answer for (iii) is same (40,60)...plz correct me sir..!