Re: Exchange Problems

Posted by duck on Aug 11, 2011; 3:47pm
URL: http://discussion-forum.276.s1.nabble.com/Exchange-Problems-tp6673309p6676874.html

Hi shreya.. :)

Q1> option A is false.
Consider an allocation A where both individuals are worse off than they are at B(another allocation), it shows that if we move from A to B, both can be made better off. Hence, by definition of Pareto Efficiency, allocation A cannot be pareto optimum.
Therefore,Pareto efficient allocation cannot be an allocation where both are worse off than they are at an allocation that is not Pareto efficient.


Q2> want some clarification.Does the utility of individual A contains x2B or was it a typo?