1.   But in competitive equilibrium prices are performing a second role.

2.   First, they ensure that the initial position of competitive equilibrium is indeed an equilibrium.

3.   Perfectly competitive free Market equilibrium will then allocate resources efficiently.

4.   Since no Pareto gain is possible, the initial position - competitive equilibrium in both Markets - is Pareto-efficient.

5.   We have now discovered that a competitive equilibrium in all Markets would generate one particular Pareto-efficient allocation.