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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
- Utility, Francis Ysidro Edgeworth