Applications of 2nd Welfare Theorem Flashcards
When z increases, production curve _________
becomes steeper
When z increases, Y vs l graph _____
becomes steeper
When z increases, c* ________
increases
c always moves with z
When z increases, l* ________
is ambiguous
Depends on which among substitution and income effect is dominant
When z increases, substitution effect causes c to ______ and l to ______
increase; decrease
c always moves with z
sub = c and l move opposite
When z increases, income effect causes c to ______ and l to ______
increase; increase
c always moves with z
income = c and l move together
z increases.
If substitution effect = income effect, c* will _____ and l* will _____
increase; be unchanged
c always moves with z
z increases.
If substitution effect > income effect, c* will _____ and l* will _____
increase; decrease
c always moves with z
sub = c and l move opposite
z increases.
If substitution effect < income effect, c* will _____ and l* will _____
increase; increase
c always moves with z
income = c and l move together
When z decreases, production curve _________
becomes flatter
When z decreases, Y vs l graph _____
becomes flatter
When z decreases, c* ________
decreases
c always moves with z
When z decreases, l* ________
is ambiguous
When z decreases, substitution effect causes c to ______ and l to ______
decrease; increase
c always moves with z
sub = c and l move opposite
When z decreases, income effect causes c to ______ and l to ______
decrease; decrease
c always moves with z
income = c and l move together
z decreases.
If substitution effect = income effect, c* will _____ and l* will _____
decrease; be unchanged
z decreases.
If substitution effect > income effect, c* will _____ and l* will _____
decrease; increase
c always moves with z
sub = c and l move opposite
z decreases.
If substitution effect < income effect, c* will _____ and l* will _____
decrease; decrease
c always moves with z
income = c and l move together
When z increases, Y* _______
increases
because Y = c + G and c* increases
When z decreases, Y* _______
decreases
because Y = c + G and c* decreases
When G increases, PPF _____
shifts down
When G increases, c* _____, l* ______ and N* ______
decreases; decreases; increases
When G increases, Y _______
increases
because Y = zF(K bar, N) and N* increases
When z changes, Y changes as per _____
c*
When G decreases, PPF _____
shifts up
When G decreases, c* _____, l* ______ and N* ______
increases; increases; decreases
When G decreases, Y _______
decreases
because Y = zF(K bar, N) and N* decreases
When G changes, Y changes as per _____
N*
When productivity of leisure increases, __________ for leisure increases
preference
When productivity of leisure increases, max ______
u(c, theta*l)
When productivity of leisure increases, u_l _________ and leisure __________
decreases; increases
because theta* u_l / u_c = w and with everything else constant, increasing theta must decrease u_l. Since u_ll < 0, decreasing u_l must increase l
