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Words: | Submitted: Mon Jan 26 2004
... A redistribution of Endowment therefore refers to the trade of Factors of Production between producers or countries in order to achieve a maximum output of goods and services. Thus, by definition, Redistribution of Endowment (in the rational sense) moves towards a Pareto Efficient Allocation of resources. However, is a Pareto efficient Allocation possible under redistribution of Endowment? A Pareto Efficient Allocation could exist on the gradient of a Production Possibilities Frontier (PPF). A PPF refers to the maximum production potentials of a country, assuming the context of a two good economy, for example bread and wine. An Allocation is Pareto Efficient if the total quantity of goods consumed is on the Production Possibility Frontier. Therefore, an Edgeworth Box can be drawn for consumption for any point on the PPF. This is illustrated in diagram "a".2 In the diagram, Bread and Wine are represented by the Horizontal and Vertical axes respectively, ...
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