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Microeconomics 2 for ECO: Welfare Economics - Summary - Tilburg university - Economics $7.02
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Microeconomics 2 for ECO: Welfare Economics - Summary - Tilburg university - Economics
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  • Microeconomics 2 for ECO: Welfare Economics
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  • Tilburg University (UVT)
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  • Economics of the Public Sector

Instagram: ECOsummaries DM me for 20% discount! Summary for the course ''Microeconomics 2''. This summary was written in order to study for the midterm as well as for the final. Everything you need to know is available in this summary. Advice: this summary alone will not be enough, the tutorials a...

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  • Yes
  • September 24, 2020
  • March 18, 2021
  • 35
  • 2019/2020
  • Summary

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  • microeconomics 2 for eco
  • welfare economics
  • micro summary
  • micro
  • micro 2 summary
  • tilburg university
  • economics tilburg university
  • tilburg university summary
  • microeconomics 2 tilburg university summary
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MICROECONOMICS 2:
WELFARE
ECONOMICS
SUMMARY

@ECOsummaries
→ 20% discount




1

,Microeconomics 2 summary
Lecture week 1
Good market outcome = maximizes welfare. Achieved by leaving the market alone. Could lead to
inefficient or unfair outcomes
Efficient market outcome: - all opportunities for trading are exploited
- goods end up in the hands of those who value them the most
- it is not possible to make one better off without making another worse off
Pareto optimal-outcome: not possible to make one better off without making another worse off

1st welfare theorem: free exchange makes everyone best off → Edgeworth box




Pareto improvement: at least one is better off without any other being made worse off
Pareto efficient allocation: when the MRS’S are equal. Their value of bread i.c.t. water is the same

Contract curve: all efficient allocations
Utility possibilities curve:




2

, Production decisions: production can vary

combination of all points that have
production efficiency




Exchange efficiency: all trades that lead to higher utility are exploited
MRSa = MRSb
Production efficiency: all changes in allocation of production that lead to more production are
exploited
MRTSlabor = MRTSland
product mix efficiency: all changes in the mix of products that lead to higher utility are exploited
MRT = Pa/Pb

Competitive economies satisfy these 3 efficiencies

Fundamental theorems of welfare economics:
- every competitive economy is Pareto efficient
- every Pareto efficient resource allocation can be attained through a competitive market

Knowledge of opportunities is important for drive towards efficiency. If the knowledge is dispersed
among many people, prices can act to coordinate the separate actions of different people.
Learn Hayek’s summary! Last slide of slides week 1




3

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