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Potentially pareto improving change

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(a) Suppose two different individuals finds themselves on a deserted island in the Pacific. Without knowing anything about the island, one person occupies the west end of the island, and the other occupies the east end. It subsequently turns out that there are certain stocks of fruits and vegetables lying around each end of the island. Is this a Pareto efficient allocation of those 5 resources among the two individuals? Explain your reasoning.

(b) Suppose that, having become aware of the fruits and vegetables on the island, the two individuals get together and exchange certain amounts of the fruits and vegetables among themselves; is that a Pareto efficient allocation of those resources? Explain your reasoning.

(c) What does it mean to say that the criterion of a Pareto efficiency does not provide a complete ordering of all the possible allocations of resources in an economy?

(d) What is the difference between a Pareto improving change and a Potentially Pareto Improving change?

Reference no: EM131692214

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