Pareto's Efficiency

Pareto's efficiency is defined as the economic situation when the circumstances of one individual cannot be made better without making the situation worse for another individual. Pareto's efficiency takes place when the resources are most optimally used. Pareto's efficiency was theorized by the Italian economist and engineer Vilfredo Pareto.

It is a purely economic concept and has no relationship with the concept of equal or fair utilization of resources. It has wide applications in the field of economics and engineering.

It is the final optimum solution beyond which any change would directly lead to loss in the allocation of resources. Pareto's efficiency is, thus, the complete solution in itself. However, it is almost impossible to achieve.