which of the following are actual pareto-effecient changes? explain briefly
1) you buy 3 oranges for rs.50 from a street vendor.
2) you are near death from thirst in the desert & must pay rs.10000 for a glass of water.
3) A mugger steals your wallet.
4) you take a taxi ride during rush hours in Delhi.
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Pareto efficiency refers to a state when a resource can be allocated to make one criterion better than before only by worsening the condition of another criterion.
Therefore, in this case, Option 2 is the pareto-efficient change. You are near death from thirst in the desert and must pay Rs.10,000/- for a glass of water.
Explanation: You will be given a glass of water to quench your thirst. This brings some relief and so makes the criterion of dying from thirst better. However, the criterion that is worsened is that to get the glass of water, you have to pay a huge price of Rs.10,000/- that is close to emptying your wallet.
In other words, to make one situation favourable, you have to make another situation unfavourable.
Therefore, in this case, Option 2 is the pareto-efficient change. You are near death from thirst in the desert and must pay Rs.10,000/- for a glass of water.
Explanation: You will be given a glass of water to quench your thirst. This brings some relief and so makes the criterion of dying from thirst better. However, the criterion that is worsened is that to get the glass of water, you have to pay a huge price of Rs.10,000/- that is close to emptying your wallet.
In other words, to make one situation favourable, you have to make another situation unfavourable.
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