Lecture+25+April+27 - Todays agenda The case for market...

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The case for market allocation revisited: A second look at the Fundamental theorem of welfare economics Remedies for market failures Today ʼ s agenda Coming attraction… Final Exam College Avenue Main Gym Thursday, May 5 8 to 11 am Not in Hickman 138! Basak Uysal will hold office hours today after lecture in Hickman 401
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Student Instructional Rating Surveys On Sakai Log in. Click "All Surveys" in the left-side menu on the "My Workspace" page.
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Q & A session Wednesday, May 4 2:00 to 5:00 p.m. 105 Voorhees Hall CAC
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Office hours and review sessions Today , office hours after class, upstairs in Hickman 401, Basak Uysal Thursday : regular problem session , 9:50 to 11:10 in Scott 214, and office hours , 2:00 to 3:20, NJ Hall 404, Cheng Gao Friday : office hours ,10:00 to 12:00, NJ Hall 429, Basak Uysal Monday : office hours , 9:00 to 10:30 in NJ Hall 303a, Douglas Blair Tuesday : office hours , 4:30 to 6:30, NJ Hall 404, Cheng Gao Wednesday : Q & A session , 2:00 to 5:00, Voorhees 105, Douglas Blair Thursday, May 5: Final exam, 8:00 to 11:00 a.m., College Avenue Main Gym
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Pareto efficiency Pareto efficiency : no feasible reallocation of inputs or outputs would make someone better off without making someone worse off. If the allocation of resources is Pareto efficient, then it is impossible to make everyone better off.
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Necessary conditions for Pareto efficiency Need to distribute output so no consumer can be made better off without making another worse off Need to be on the PPC Need to be at the right point on the PPC Butter Guns
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First efficiency requirement: Distribute produced goods optimally “Distributive efficiency” Distribute output so no consumer can be made better off without making another worse off Need: MRS AB me = MRS AB you
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First efficiency requirement: Distribute produced goods optimally “Distributive efficiency” Distribute output so no consumer can be made better off without making another worse off Need: MRS AB me = MRS AB you B A B A Me You
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First efficiency requirement: Distribute produced goods optimally “Distributive efficiency” Distribute output so no consumer can be made better off without making another worse off Need: MRS AB me = MRS AB you
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Pareto improvement: You give me 2 bananas. I give you 1 apple.
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B A B A Me You 1 1 2 2 Pareto improvement: You give me 2 bananas. I give you 1 apple.
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First efficiency requirement: Distribute produced goods optimally “Distributive efficiency” Distribute output so no consumer can be made better off without making another worse off Need: MRS AB me = MRS AB you MRS AB me = p A / p B = MRS AB you Utility maximization
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First efficiency requirement: Distribute produced goods optimally Earlier (and equivalent!) view Need: MB X
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