Week 6_ Unit 5 PROPERTY AND POWER: MUTUAL GAINS AND CONFLICT

Question 1

Allocation:

Answer 1

Allocation: outcome of an economic interaction. (Describes who does what,
and who gets what)

Question 2

Pareto efficient?

Answer 2

Pareto efficient if nobody can be better off without making
somebody worse of

outcome which has no possibility to improve further

Question 3

Pareto improvement?

Answer 3

Pareto improvement is a change that benefits at least one person without
making anyone else worse off

if an outcome has pareto improvement, it is not pareto efficient

Question 4

Why can allocations be considered unfair?

Answer 4

1. Inequality of final outcome (e.g. wealth, well-being)
   Substantive judgement of fairness
2. How they came about (e.g. force vs. fair play, equal
   opportunity, conforming to social norms)
   Procedural judgement of fairness

Question 5

Effect of power in economics?

Answer 5

• It may set the terms of an exchange: By making a take-it-or-leave-it offer.

• It may impose or threaten to impose heavy costs: Unless the other party acts in a way that
benefits the person with power.

Question 6

substantive judgements of fairness?

Answer 6

How unequal they are: In terms of income, for example, or subjective wellbeing.

e.g it may be unfair for a 50-50 split if one person is struggling financially and one is not

Question 7

procedural judgements of fairness?

Answer 7

How they came about: For example by force, or by competition on a level playing field. These are procedural judgements of fairness.

e.g. it may be unfair if someone pulls a gun forcing a certain split