AGEC 21700 Lecture Notes - Lecture 21: Social Welfare Function, Gross National Happiness, Deflation
17 Oct 2016
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Objective of economics is to get to the big h. We are doing awful and not even close. Household utility (happiness) function: a function that orders commodity bundles based on household preferences. Cardinal utility: the ability of a household to determine the change in magnitude of satisfaction between bundles. Ordinal utility: the ability of a household to rank a set of commodity bundles. All we can say is x>y (x is preferred to or indifferent to y) We require a social welfare function for measuring happiness. Gross domestic product (gdp): market value of all final goods and services produced. Value added: the increase in value an input adds to the production of a commodity. Gdp= government spending (g) + consumer spending/consumption (c) + Investments (i) +(exports (x) imports (m) =wages (w) + depreciation (d) + taxes (t) + (interest (i) +profit (pi) + input cost besides wages (v)) 1950"s economists started to questions whether gdp accurately measures social welfare.
