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please respond to the following discussion response as a peer commenting on the response. Pareto efficiency is defined informally as an allocation of resources where someone cannot be made better off without making someone else worse off (Metcalfe, 2000). Conditions for achieving such an efficiency include having exchange efficiency, where no further trade can be mutually beneficial, and production efficiency, where the reallocation of factors of production (like land or machinery) to make goods cannot be improved (Metcalfe, 2000). The Pareto Principle states that 80% of consequences come from 20% of the causes.

This is sometimes called the 80-20 rule due to the fact that out that 80% of a company’s revenue is generated by 20% of its customers. At its core, the 80-20 rule is about identifying an entity’s best assets and using them efficiently to create maximum value. Business managers from all industries use the 80-20 rule to help narrow their focus and identify those issues that cause the most problems in their departments and organizations (Tardi, 2020). Those who use Six Sigma and other strategies have incorporated the 80-20 principle in their practices with good results (Tardi, 2020).

However, we must remember this is not a law, and things in life are not distributed evenly. The Pareto Principle helps you realize that the majority of results come from a minority of inputs(Understanding the Pareto Principle (The 80/20 Rule). Pareto efficiency largely ignores equity and distribution (Understanding the Pareto Principle (The 80/20 Rule).

References

Metcalfe, D. (2000). Rethinking Pareto-Efficiency and Joint Feasibility. Negotiation Journal, 16(1), 29-33. https://doi.org/10.1023/A:1007590219594

Tardi, C. (2020). 80-20 Rule. https://www.investopedia.com. https://www.investopedia.com/terms/1/80-20-rule.asp

Understanding the Pareto Principle (The 80/20 Rule). https://betterexplained.com. https://betterexplained.com/articles/understanding-the-pareto-principle-the-8020-rule/