ECON 290 : Tut1_Week2_Key.pdf
11 Oct 2014
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Week 2: a mixed economy combines the free market with limited government intervention. All the major economies, including canada, are mixed economies. Explain why government interventions are necessary in a market economy. Government provides individuals with items not available in markets. Explain why pareto efficiency is a weak evaluation criterion. Efficiency is a normative concept, and it is used for evaluating effects of resource use on individual well-being. Pareto efficiency is a weak evaluation criterion, because it says nothing about distribution, and it cannot be used to rank allocations: efficiency is a well-accepted principle in economics. If a given allocation is inefficient, then we can re-allocate the resources to make at least one person better-off without reducing the well-being of any other person. Week 2: consider the following ppf that shows the alternative combinations of government goods and services and private goods and services that can be produced in an economy.
