Pareto efficiency

Pareto efficiency, also known as Pareto optimality, is an economic concept that describes a situation in which resources are allocated in a way that no reallocation can make one individual better off without making at least one other individual worse off. In simpler terms, an allocation is Pareto efficient if there are no possible changes that could improve someone's situation without harming someone else's situation.

Allocative efficiency is an economic concept that occurs when resources are distributed in such a way that maximizes the total benefit received by all members of society. In other words, it refers to a situation where the quantity of each good or service produced is exactly what consumers want to consume, reflecting the highest utility or satisfaction. Allocative efficiency is achieved when the price of a good or service is equal to the marginal cost of producing it.

Fractional Pareto efficiency is a concept that extends the traditional notion of Pareto efficiency in economics and optimization theory. While a traditional Pareto efficient allocation occurs when it is impossible to make one individual better off without making another individual worse off, fractional Pareto efficiency introduces a more nuanced approach. In fractional Pareto efficiency, one assesses configurations where some individuals may be partially made better off without entirely disadvantaging others.

Kaldor–Hicks efficiency is a concept in welfare economics used to evaluate economic allocations and policy changes. It represents a criterion for judging the desirability of an allocation of resources or a policy decision based on the potential for wealth creation and redistribution.

Ordinal Pareto efficiency is a concept in economics and social choice theory that builds upon the idea of Pareto efficiency in a way that incorporates ordinal preferences rather than cardinal utility. ### Key Concepts: 1. **Pareto Efficiency**: A state is Pareto efficient if there is no other allocation of resources that can make at least one individual better off without making someone else worse off. In other words, a distribution cannot be improved for one individual without degrading the situation for another.