Chapter03 - Chapter 3 Welfare Economics Contents General...

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Chapter 3 Welfare Economics Contents: General Analysis Overview Welfare under Monopoly Welfare under Monopsony Welfare under Middlemen General Analysis Overview Welfare analysis is a systematic method of evaluating the economic implications of alternative allocations. Welfare analysis answers the following questions: 1. Is a given resource allocation efficient? 2. Who gains and who loses under various resource allocations? By how much? Welfare economics: A methodological approach to assess resource allocations and establish criteria for government intervention. Partial analysis: Evaluates outcomes in a subset of markets assuming efficiency in others. Figure 3.1 D = demand curve S = supply curve Area under demand curve ABC 0 = gross Area under supply curve 0 ELM = cost benefits from consumption. of production. ABP = consumer surplus area between PLM – area between price and supply = demand and price. producer surplus.
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2 When there are no externalities, an efficient outcome occurs where the sum of
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This note was uploaded on 11/16/2008 for the course ECON 101 taught by Professor Wood during the Spring '07 term at Berkeley.

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Chapter03 - Chapter 3 Welfare Economics Contents General...

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