Pareto Efficiency

Pareto Efficiency Meaning:
A concept dealing with the efficiency of situations. A situation that is Pareto efficient cannot be changed in a way that makes it better for at least one of the people involved without making it worse for one or more of the people involved.

Pareto Efficiency Example:
Suppose you have two people, one of whom likes only bananas and the other only pears. If both people have one apple and one pear each then the situation is not Pareto efficient. If the pear-lover were to give his apple to the apple-lover in return for the apple-loverís pear, then the situation would become Pareto efficient, as now that the pear-lover has both pears and the apple-lover both apples, any further change in the distribution would be worse for either or both of them.