Pareto Optimality | Efficiency and Market Failure in A Level Economics

This presentation provides an in-depth exploration of Pareto optimality, a key concept in economics. It discusses its significance in optimising resource allocation, and how it relates to efficiency. Gain insights into real-world applications and understand how Pareto improvement can improve outcomes in individuals in the society. Enhance your understanding of this critical concept through illustrative examples.

1. Pareto
Optimality
Agricultural products
Industrial products
C

D

E
A
B
Pareto
improvement
Economics

2. What is Pareto
Optimality?
▪Pareto Optimality is a situation
where reallocation of resources
will not make a person better off
without making another person
worse off.
▪It was named after Vilfredo Pareto
(1848–1923).

3. Pareto Optimality
▪Pareto Optimality can be
shown on the PPC.
Agricultural products
Industrial products
800
0
500
1,000 1,200
A (800AP,1000IP)
B (500AP,1200IP)

4. Pareto Improvement
▪Points within the PPC are
not Pareto efficient.
▪They can be improved
upon.
Agricultural products
Industrial products
0
C
(250AP,400IP)
D
(250AP,700IP)
(700AP,600IP)
E

5. Pareto Efficient
▪Pareto Optimality can be
shown on the PPC.
▪Points on the PPC are
Pareto efficient.
Agricultural products
Industrial products
0
A
B

6. Pareto Improvement
Consumers Samson Latty Ruth Dave Total
Quantity of goods 20 18 14 20 72
Consumers Samson Latty Ruth Dave Total
Quantity of goods 22 18 14 21 75
Initial Allocation
After Reallocation

7. Non-Pareto
Improvement
Consumers Samson Latty Ruth Dave Total
Quantity of goods 20 18 14 20 72
Consumers Samson Latty Ruth Dave Total
Quantity of goods 20 22 12 23 75
Initial Allocation
After Reallocation