Utility–possibility frontier

[2] Therefore, it can be said that the frontier is the utility maximisation by consumers given an economies' endowment and technology.

[3] This means that points on the curve are, by definition, Pareto efficient, which are represented by E, F and G in the image to the right.

[4] Because all points along the UPF represent different real income distributions, all being Pareto efficient, it is difficult to determine which utility combination is preferable to society.

Usually, the social welfare function, which incorporates the deservedness of the two individuals and states how society’s well-being relates to that of the two individuals, is required to maximize social welfare.

To maximize social welfare, a point on the UPF would be chosen that also falls on the highest indifference curve for society.

The two individuals have a utility function of UA (X, Y) and UB (X, Y), where X and Y represent two goods.