The Concept of Economic Efficiency 



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FIGURE 3. The Consumer's Preferred Combination of Goods 



therefore, is regarded as the most efficient one since no exchanges 

 among consumers could improve any individual's position and 

 still permit others to remain as well off as before. 



Thus far, both the expenditure budget and the total output to 

 be distributed have been taken as given. How these are determined 

 are legitimate questions. Let us begin with the consumer's budget. 

 How much a consumer will spend for consumption purposes will 

 depend partly on the amount of his income and partly on his 

 time preference — on whether his expenditures are strongly influ- 

 enced by current consumption needs or by his anticipated future 

 requirements. 



