ECON 367 Lecture Notes - Lecture 2: Social Welfare Function, Economic Surplus, Allocative Efficiency
Document Summary
Econ 367 lecture 2: efficiency standards i. Allocative efficiency: producing right output that society values most or giving the good to the person who values it the most (willing and able, condition for ae, max economic surplus, perfect competition p = mr = Swf (social welfare function) tangent to upc: understanding allocative efficiency, price floor/ceiling/quotas (examples of dwsl and. Inefficiency) = smaller actual amount exchanged, reduction of total economic surplus mkt inefficiency i. Does it max social welfare: d as benefit, s as cost i. ii. iii. iv. v. D is sloped down bc p net benefit . S is the opposite, (all consider marginal cost of selling additional unit) Benefit = utility in; cost = utility out. Demand is benefit bc utility is given from buyer preference, p will until p = b (what you give up is what you get)
