On the other hand, any point like B in Fig. That is, if we are at some point on the CCP, then we are no longer able to effect by a change in the allocation of the inputs, an increase in the output of one of the goods without reducing the quantity of the other. We have obtained then that all the points on the CCP are Pareto-efficient points in production. The CCP would run from the point O to the point O’ in Fig. If we join all the points of tangency between the IQs for the two goods, by a curve, we would obtain what is called the Edge-worth contract curve for production which we would denote by CCP. It is obvious from above that the Pareto efficiency point in production must necessarily be a point of tangency between the IQs for the two goods. Thus, the marginal condition for Pareto efficiency in production is given by (21.1) which states that the marginal rate of technical substitution (MRTS) between the two inputs should be the same in the production of the two goods. MRTS X1, X2 or, in the production of Q 1 = MRTS X1,X2 in the production of Q 2 (21.1) However, at the point of tangency between the IQs for the two goods, we have numerical slope of IQ for good Q 1 = numerical slope of IQ for good Q 2 Similarly, maximisation of output of Q 2 subject to the quantity of Qi as given by IQ 3, would occur at the point of tangency R between the IQs for the two goods. For example, maximisation of output of Q 1 subject to the quantity of Q 2 as given by IQ3, would occur at the point of tangency S between the IQs for the goods.
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