lecture11full

lecture11full - due when taxes on wages increase as there...

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Recap Income was determined in part by endowments of particular goods Price increases affected consumption but also income Labor supply 1 with no non-labor income, increase in the wage looked just like a decrease in the price of consumption 2 whether someone works more after a wage increase depends on whether the substitution effect is bigger than the wealth effect Taxes and labor supply 1 raising taxes on wages always leads to more revenue for Cobb-Douglas and perfect compliments case 2 Quasi-linear preferences led to decreases in labor supply
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Unformatted text preview: due when taxes on wages increase as there are no wealth effects 3 Laffer curve Al Al meets Betty Pareto efciency Pareto efciency: Cant make someone better off without making someone else worse off Prices Welfare Theorems First Welfare Theorem: Market equilibria are Pareto efcient Second Welfare Theorem: If preferences are strictly convex, a Pareto efcient point can be supported as a market equilibrium Example Example 2 Example 3 Example 4 Shrinking Core Shrinking Core 2...
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lecture11full - due when taxes on wages increase as there...

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