Lecture note Public finance (10th Edition) - Chapter 3: Tools of normative analysis

In this chapter, the following content will be discussed: Welfare economics is the study of the desirability of different economic states; first fundamental theory of welfare economics: competitive markets result in pareto efficiency; second fundamental theory of welfare economics: society can attain any pareto efficient outcome with reassignment of initial endowments and free trade. | TOOLS OF NORMATIVE ANALYSIS Chapter 3 Welfare Economics Concerned with the social desirability of alternative economic states. 3- Consumption Economy Edgeworth Box - an analytical device used to model welfare economic theory Depicts distribution of goods in a 2-good/2-person economy Pareto Efficiency – an allocation of resources such that no person can be made better off without making another person worse off Pareto Improvement – a reallocation of resources that makes at least one person better off without making anyone else worse off 3- Edgeworth Box 2 person / 2 good economy Adam Eve 0 0’ s r Apples per year Fig leaves per year v w u y x At “v”, how many apples and figs do Adam and Eve consume? 3- Box and dimensions initially set 1st click – place point v 2nd click – draw horizontal line uw 3rd click – draw vertical line xy Indifference curves in Edgeworth Box Adam Eve 0 0’ s r Apples per year Fig leaves per year A1 A2 A3 E1 E3 E2 3- Box and . | TOOLS OF NORMATIVE ANALYSIS Chapter 3 Welfare Economics Concerned with the social desirability of alternative economic states. 3- Consumption Economy Edgeworth Box - an analytical device used to model welfare economic theory Depicts distribution of goods in a 2-good/2-person economy Pareto Efficiency – an allocation of resources such that no person can be made better off without making another person worse off Pareto Improvement – a reallocation of resources that makes at least one person better off without making anyone else worse off 3- Edgeworth Box 2 person / 2 good economy Adam Eve 0 0’ s r Apples per year Fig leaves per year v w u y x At “v”, how many apples and figs do Adam and Eve consume? 3- Box and dimensions initially set 1st click – place point v 2nd click – draw horizontal line uw 3rd click – draw vertical line xy Indifference curves in Edgeworth Box Adam Eve 0 0’ s r Apples per year Fig leaves per year A1 A2 A3 E1 E3 E2 3- Box and dimensions initially set 1st click – Adam’s indifference curves 2nd click – Eve’s indifference curves Beginning at Point g, how to make Adam better off without Eve becoming worse off Adam Eve 0 0’ s r Apples per year Fig leaves per year Ag Ah Ap Eg g h p A Pareto Efficient Allocation 3- Box and dimensions initially set 1st click – “A Pareto efficient allocation” and arrow Beginning at Point g, how to make Eve better off without Adam becoming worse off Adam Eve 0 0’ s r Apples per year Fig leaves per year Ag Eg g p1 p Ep1 A Pareto Efficient Allocation 3- Box and dimensions initially set 1st click – “A Pareto efficient allocation” and arrow Beginning at Point g how to make both Adam and Eve better off Adam Eve 0 0’ s r Apples per year Fig leaves per year Ag Eg g p1 p Ep2 Ap2 p2 Pareto efficient Pareto improvement 3- Box and dimensions initially set 1st click – Box with Pareto efficient and improvement within Starting from a different initial point: Point k Adam Eve 0 0’ s

Không thể tạo bản xem trước, hãy bấm tải xuống
TÀI LIỆU MỚI ĐĂNG
Đã phát hiện trình chặn quảng cáo AdBlock
Trang web này phụ thuộc vào doanh thu từ số lần hiển thị quảng cáo để tồn tại. Vui lòng tắt trình chặn quảng cáo của bạn hoặc tạm dừng tính năng chặn quảng cáo cho trang web này.