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Lecture: Efficincy and Equity (Part 2)

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ECON 1050

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Lecture 7 ECON1050 Page 1 MICROECONOMICS Efficiency and Equity continued Focus individuals make choices in their own selfinterestmarkets coordinate individuals choices in the hopes that they will benefit societydo markets produce a fair outcomeFAIRNESS OF MARKETS Two Categories of Unfairness A Unfair Resultsresults are fair when everyone benefitsUtilitarianism principle that states that we should try to achieve the greatest happiness for the greatest number idea that equality brings efficiency o example Scandinavian countries o concept if everyone gets the same marginal utility from the same amount of income and the marginal benefit of income decreases as income Is the Competitive Market Fair increases then taking a dollar from a rich person Tom and giving it to a poorer person Jerry increases total benefit greatest happiness is achieved when the income is equally distributed Figu
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