Tuesday, April 13, 2010

Pareto Improvement

This treatment of ranking social allocations is functional based on the notion of gains from trade. When there are gains from trade, what does that look like in the Edgeworth Box? What allocations make both consumer A and consumer B better off? So the role of the status quo as determined by the initial allocation is implicit. There is no goal to determine the entire contract curve. This is just to get the notion of Pareto Improvement in place and to get the students to understand what an allocation looks like when no further Pareto Improvement is possible.

This is the audio only in case the student prefers to play with the spreadsheet while listening.