AS.180.101 Chapter Notes - Chapter 1 and 3: Pareto Efficiency, Economic Efficiency, Indifference Curve
Document Summary
Economy= set of institutions, laws, rules, customs through which we transform a society"s resources into material goods and services for consumers. Economies with richer endowments of resources usually yield higher standards of living. An economy"s success at producing goods and servies for its citizens depends upon more than the resources it has to work with also depends critically upon the efficiency with which it transforms inputs into outputs. Economic efficiency: this definition of efficiency is called pareto optimality a state of the world such that it is impossible to make any consumer better off without making another worse off. An indifference curve represents all of the combinations of goods which make a given consumer equally happy: a consumer becomes better off whenever he or she moves to a higher indifference curve. 2: *hits at the idea of efficiency versus equity this is key discrepancy between efficiency and equity (how big the pie is versus how it is divided.
