Lecture Week 4 Exam revision

Lecture Week 4 Exam revision

1. 1st Theorem of Welfare Economics

   • Competitive Market Equilibrium
   • Which satisfies the requirement of a Pareto optimality
     • points btw are pareto optima on graph
       • Pareto optimum =efficient allocation
         • Equilibrium is Pareto optimum
   • Graphical Analysis
     • Tangency of Indifference curves Espedially for E
     • Everybody faces relative price No impact on Price

2. 2nd Theorem of Welfare Economics

   • set of prices which allows
   • Pareto optimum being reached
     • Redistribute Pareto OPtima
     • State redistribution via taxes
     • If redistributed market can reach PO
   • Using initial distribution of endowments
   • Graphical analysis
     • Can endowment I reach Pareto optima?
       • Is redistribution needed for Pareto Optima

3. XTERISTICS OF COM MRKT

   • Decentralisation
   • Agents selfish comp very active
   • Access to information for consumer