Pareto Optimum

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Definition: Pareto Optimum

In a Pareto efficient economic system there won’t be any allocation of goods without affecting at least one individual negatively. With initial allocation of goods to set of individuals one can change to different allocations such that at least one individual would benefit but none would be affected negatively.

This optimum allocation or improvement is known as Pareto Improvement. Finally when no further Pareto improvement can be done it is known Pareto Optimum or Pareto Optimal.

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