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Unformatted text preview: Principles of Economics I
Economics 101 Section 400 Class 2 Announcements Syllabus available on CTools First assignment available on CTools First assessable quiz in this week's discussion section Today's Readings: For next class: Chapter 1: Introduction Chapter 2: Production Possibilities and Comparative Advantage Chapter 3: p. 75 79 (Production Decisions)
Class 1 2 1/7/2009 Efficiency Normative statement: Any reallocation 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 Improvement) 1/7/2009 Class 1 3 Efficiency
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 called inefficient.
1/7/2009 Class 1 4 Efficiency Definition: An allocation of resources is efficient, or Pareto efficient, if any reallocation of resources that makes one person better off necessarily makes another person worse off. 1/7/2009 Class 1 5 How do markets allocate resources? How efficiently does the market allocate resources? Are there remedies available when ma...
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