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Unformatted text preview: 1.5 Pareto eﬃciency An allocation is Pareto eﬃcient if there is no way to make some group of people better oﬀ without making someone else worse oﬀ. Put diﬀer-ently, if something is not Pareto eﬃcient, then there is some way to make some people better oﬀ without making someone else worse oﬀ. Note also if something is not Pareto eﬃcient, then there is some kind of “waste” in the allocation system. 1.6 Short-run Vs. long-run The short-run and long-run in microeconomic analysis are not directly re-lated to time. Rather, short-run looks at the case when only one explana-tory variable is allowed to change (e.g. production as a function of labor). In the long-run, all variables are allowed to adjust (e.g. production does not depend only on labor, but many other factors)....
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This note was uploaded on 03/14/2010 for the course ECON microecono taught by Professor Yy during the Spring '10 term at Seoul National.
- Spring '10