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Unformatted text preview: Lecture 11 Review so far consumer choice production Now we want to integrate this. 1 Markets: Introduction We consider a market with several commodities several/many consumers several/many producers/firms Our objects define price-taking/competitive equilibrium show equilibrium production/consumption is efficient Efficient means: It is not possible to rearrange production and consumption and make everyone better off. Efficiency in this sense is frequently called Pareto optimality . Efficiency entails right outputs (right things/right amounts) are produced outputs are produced in the right way ( productive efficiency ) not possible to use same total inputs and produce more output not possible to use less total inputs and produce same output consumption is allocated to the right consumers ( allocative efficiency ) not possible to rearrange total consumption and make all con- sumers better off We will eventually show that price-taking/competitive equilibrium is...
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- Fall '07