Suppose that X is a Pareto-efficient allocation of resources

If X is a pareto efficient allocation of resources it means it is the most efficient way of resource allocation because it means that resource cannot be reallocated to make one individual better off without making atleast one individual worse off.

Pareto efficiency and production possibility frontier.

Let us assume there are two goods in the economy, good A and B represented on horizontal and vertical axis.

The letterW, X, Y and Z represents the allocation of resources.

The point y and Z below ppc represents pareto inefficient because there exist the possibility of increasing output of both goods A and B

The point W represents an outcome which cannot be achieved with the available resources

The point X represents pareto efficient because there is no improvement possible. At this point increasing the output of one good would reduce the output of other good.

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