How Economists Can Make Judgements About the Relative Efficiency of Consumers - Assignment Example

The paper "How Economists Can Make Judgements About the Relative Efficiency of Consumers" is a great example of an assignment on macro and microeconomics. In economics, the utility possibilities frontiers are synonymous with production possibilities frontier. The frontier is also known as the utility possibility curve. It’s used as a measure to depict the maximum amount of one person’s utility regarding the relativity of others in society.

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Pareto efficiency is depicted by the points that are itself sufficient in the graph, while the points of the graph are depicted as not self-sufficient. But however, based on the disparities in real incomes and societal preferences some of the points may be considered even if they are off the graph. It goes without saying that all points below the line are attainable by the available resources while the points that are above can’t be obtained using the available resources. It’s from the contract curve where the utility possibility frontier is derived from(Xepapandeas 2010) The contract curve represents the set of points that represents the optimal allocation of two goods between consumption of two goods while given the initial allocation of the two goods. In this regard the utility possibility frontier depicts a set of levels of utilities for a reasonable number of outputs, thus on this note, it represents the contract curve in an edge worth box. How does the Utility possibility frontier achieve efficiency? One of its main objectives is to, maximize social welfare hence for the set of points the utility of consumer 1 and consumer 2 is maximized subject to the available resource.

Conclusion

Efficiency is chosen in the instance of the highest indifference curve on societal needs. It’s commonly believed that social welfare value changes as a result of a change in individual welfare. Economist postulates that if social welfare improves the Utility possibility frontier shift to the right and while it decreases the curve shifts to the left. This will help economists to judge the efficient allocation among members.