PUP-3002 Lecture Notes - Lecture 3: Pareto Efficiency, Economic Equilibrium, Avoidance Speech
Document Summary
1. 3 public policy as a solution to social dilemmas. Individuals not always to secure optimal outcomes for themselves. Gov and market institutions able to solve these problems by. Institutions hope to improve resultant outcomes of social interaction. Normative criteria: what the state of the world should be. Positive criteria: what the state of the world is. The relative levels of performance among alternative states of allocating goods. With change of allocation, no individual is worse off" and at least one individual is better off. Finding policy solutions that are pareto efficient is often quite difficult. When reallocating goods, if the beneficiaries collectively gain more than the losers are worsened. The winners can potentially compensate the losers. Overall society has a greater level of goods avaialble. Market: any institution or operation wherein individuals can trade goods, services, information. The relative pressures of supply and demand determine the prices of goods and services.
