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Two firm two consumer economy efficiency (two goods) ){kind=link}
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| Two firm two consumer economy efficiency (two goods) | Hi,
For pareto efficiency (given everything is convex, returns to scale are <=1) 1. MRS of all consumers=Marginal rate of transformation (slope of production possibilites frontier)=p(x)/p(y) 2. MRTS (Rate of technical substitution) for all producers=wage rate/rental rate Is it necessary that all conditions in 1 and 2 are equal among themselves too? As in, is MRS=MRTS=...==...? Also, for 2nd welfare theorem to hold, do we require the PPF to be a convex set, or each individual production functions to be convex set?
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