00:01
Is it possible to have a pareto efficient allocation which somewhere is worse off than an allocation that is not pareto efficient? the answer would be yes, this is possible.
00:20
There are many scenarios in an edgeworth box which gives overlapping utility functions of two individuals where a point may be located at the end of a box on the contract curve.
01:27
If we were to draw this, the contract curve is going to be the set of tangency points between the indifference curves of two consumers.
01:57
We have a set of indifference curves going one way and a set of indifference curves going the other way.
02:04
These are tangent to each other and we have the contract curve running through these points.
02:12
This is called the contract curve because the outcome of negotiation between the two consumers results in an agreement that has an outcome on this curve.
02:27
This is also known as the pareto set.
02:30
It is a set of points representing final allocations of two goods between two people that could occur as a result of mutual beneficial trading between these people.
02:59
These curves are tangent to each other at these points.
03:05
At these points, both of the individuals have obtained a combination of the two goods such as x or y that has satisfied the condition that the combination lies on the utility curve for both individuals 1 and 2...