Econ 101 Winter 2010 Lecture 2

Econ 101 Winter 2010 Lecture 2 - Click to edit Master...

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Unformatted text preview: Click to edit Master subtitle style Lecture 1 Economics 101 Microeconomics University of Michigan Winter 2010 Lecture 2 Lecture 1 22 Lecture 1 Office Hours Chad: Mon 12 2 (Lorch M109) Tues 11 1 (Lorch M109) Wed 12 2 (Lorch M109) Thurs 11 2 (Lorch M109) GSI Pool: Mon 10 12, 5 6 (Lorch 102) Tues 9 10, 3 6 (Lorch 102) Wed 1112 (Lorch 121) , 4 5 (Lorch 102) Thurs 9 11 (TBA) Lecture 1 33 Lecture 1 Efficiency Suppose resources are currently allocated in some arbitrary way Imagine re-allocating resources in such a way that: n Nobody is made worse off n At least one person is made better off Do you think that such a re- allocation should take place? Lecture 1 44 Lecture 1 Example Amy, Bill and Chris all free concert tickets n Amy wins a ticket to an American Idol All Stars concert, but would prefer to go to a Green Day concert n Bill wins a ticket to a Green Day concert, but would have preferred to go to a Black Eyes Peas concert n Chris wins a ticket to a Black Eyed Peas concert, but would prefer to go to an American Idol All Stars concert Is this the best allocation of the three tickets? Do you think the allocation of tickets should Lecture 1 55 Lecture 1 Efficiency and Inefficiency Normative statement : Any re-allocation of resources that makes at least one person better off, and makes no person worse off, should be pursued We call such a reallocation of resources a Pareto Improving Reallocation (or simply a Pareto Lecture 1 66 Lecture 1 Efficiency and Inefficiency Implication: We should not be satisfied with an allocation if it is possible to make at least one person better off without making another worse off. Such an allocation will be labeled inefficient . Lecture 1 77 Lecture 1 Efficiency Definition: An allocation of resources is efficient, or Pareto efficient, if reallocating resources to make one person better off will necessarily make another person worse off. Lecture 1...
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This note was uploaded on 04/20/2010 for the course ECON 101 taught by Professor Gerson during the Winter '08 term at University of Michigan.

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Econ 101 Winter 2010 Lecture 2 - Click to edit Master...

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