why is pareto efficiency important 
pareto efficiency is commonly used to compare various economic outcomes of proposed policies though the pareto test has limitations as to which one to choose it can be an indicator to inform analysts which option is most efficient and allocates resources with the least amount of waste it is also an important psychological concept that helps decision makers realize which individuals will be better off and which will be worse off based on market efficiency the bottom linepareto efficiency occurs when an economy is most efficiently allocating its goods at this point no further changes to the economy can be made without one party benefiting and one party becoming worse off often used to evaluate outcomes of public policy or decisions that impact larger groups of individuals pareto efficiency is heavily used in economics to determine competitive equilibrium 