Académique Documents
Professionnel Documents
Culture Documents
Introduction
a.
So far, our analysis has been positive (what is) rather than normative (what
should be).
b.
In this chapter, we take up welfare economics, which is the study of how the
allocation of resources affects economic well being. P. 137.
c.
Mankiw continues to argue that markets are usually a good way to organize
economic activity.
2.
3.
c.
4.
Market Efficiency
a.
CS and PS are the basic tools that economists use to study the welfare of
buyers and sellers in a market.
b.
The Benevolent Social Planner
i.
Def: Efficiency is the property of a resource allocation of
maximizing the total surplus received by all members of society.
P. 147.
ii.
Def: Equity is the fairness of the distribution of well being among
the members of society. P. 148.
iii.
Efficiency is easier to evaluate than equity.
c.
Evaluating The Market Equilibrium
i.
Three insights about market outcomes:
(1)
Markets allocate the supply of goods to the buyers who
value them the most.
(2)
Markets allocate output to the lowest cost producers.
(3)
Markets produce the quantity of goods that maximizes the
sum of consumer and producer surplus.
ii.
Figure 7: Consumer and Producer Surplus in the Market. P.
148.
iii.
Figure 8: The Efficiency of the Equilibrium Quantity. P. 149.
iv.
Case Study: Should There be a Market in Organs? P. 150.
(1)
Many economists believe that there would be large benefits
to allowing a free market in organs.
v.
In the News: Ticket Scalping, P. 151.
vi.
In the News: The Miracle of the Market. P. 153.
(1)
This is an important article as it points out all the invisible
activities that have to occur to make a Thanksgiving dinner
6.
Summary