social welfare

Question 1

Pareto Criterion

Answer 1

Pareto Criterion: a social outcome z! is Pareto superior to x if no-one
finds z! worse than x and at least one person finds it strictly better

Question 2

what are the issues with pareto criterion (5)

Answer 2

P- rovides an incomplete ordering of social outcomes: e.g. any two PE
outcomes are Pareto incomparable
* It also doesn’t tell us how much better one situation is over another
* It doesn’t help in deciding between two Pareto improving policies
* It says nothing about the distribution of welfare between individuals
* Moving from a Pareto sub-optimal outcome (X) to a Pareto efficient
outcome (X’’) might make someone worse off.

Question 3

why is an isowelfare curve downward sloping

Answer 3

As you increase the resources given to one person, you need to decrease the resources given to another to maintain the same level of overall well-being.

Question 4

2 Different views of the market system – causes of inequality matter:

Answer 4

Markets exploit gains from trade and give people freedom
* might mean accepting inequalities that arise Markets are inherently unequal because they accentuate underlying
inequalities in talent/social background/property rights
* role for government intervention