Microeconomics I partie 1/9
Fiches de révision
Fiches de révision
Set of flashcards Details
| Flashcards | 40 |
|---|---|
| Language | English |
| Category | Macro-Economics |
| Level | University |
| Created / Updated | 31.05.2019 / 02.10.2023 |
| Licencing | Attribution-NonCommercial-NoDerivs (CC BY-NC-ND) (Unversité de Genève, cours de Pr. Monika Mrazova) |
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STWE: Can a Pareto efficient allocation be achieved as a competitive equilibrium?
Yes, if preferences are convex
FTWE does not hold in
the presence of externalities
FTWE focuses on efficiency, not fairness
Allocation where one person owns everything is Pareto efficient
The FTWE tells us that
the resulting equilibrium from these independent, self-interested and decentralised actions is efficient
This is the nature of the “Invisible Hand” of Adam Smith
Implicit assumptions of the FTWE: Each consumer knows only
his own tastes, endowment and the market prices
FTWE
any competitive equilibrium is Pareto efficient
Using Walras’ Law we can show that
if demand equals supply in one market, the same must be true in the other market.
