Concepts: General Equilibrium, Simultaneous Equilibrium, Partial Equilibrium, Allocative Efficiency, Robinson Crusoe, PPF Curve, MRS
- Interdependence between production and consumption of private and for social goods and consider how an omniscient referee1 would resolve the problem in general-equilibrium (production and consumption, private and social good) terms.
A. MEANING OF EFFICIENCY
Model: Robinson Crusoe could do it well (a single individual who will survey the resources and technology around him and transform them into goods).
Problem: Efficiency will effect equity.
- Pareto Efficiency: limited scope
B. EFFICIENT PROVISION OF PRIVATE GOODS
Footnotes
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Assumption: Aware of how individuals value social goods ↩