In an Edgeworth box, the Consumption Contract Curve identifies all Pareto-efficient allocations of goods between two consumers. These allocations are defined by points where the consumers’ indifference curves are tangent, indicating that their marginal rates of substitution (MRS) between the two goods are equal.

The Consumption Contract Curve spans the entire Edgeworth box, showing a range of possible efficient allocations. However, the utility distribution varies along this curve. For example, points closer to the lower left of the curve represent low utility for one consumer (e.g., Taylor) and high utility for the other (e.g., Alex). Conversely, points near the upper right corner indicate the opposite distribution.

The choice of a specific point on the contract curve depends on factors like individual preferences or the outcome of bargaining between the two parties. Once a point is selected, moving to another point on the curve would harm at least one party. For instance, if Taylor and Alex are at point E, shifting to point F could result in Taylor receiving fewer apples and oranges, even though both points are efficient.

While all points on the Consumption Contract Curve are Pareto-efficient, efficiency alone does not guarantee fairness or equality. A particular allocation’s desirability depends on individual preferences. For instance, if Taylor and Alex are initially at point E, moving to point F might reduce Taylor’s allocation of apples and oranges, lowering their utility. Since both E and F are Pareto-efficient, the choice between them depends on how individuals value the trade-offs between goods. This highlights a key limitation of Pareto efficiency—it does not account for equity or distributive justice concerns.