Welfare economics

Question 1

Bentham

Answer 1

1. Utilitarianism
2. decreasing marginal utility of money ( wealth is measure of happiness)
3. Mixed views on govt. intervention

Question 2

Pareto

Answer 2

1. relationship between the utility function and the indifference curves by constructing
   indifference maps - ordinal utility
2. Pareto optimality
3. Optimal distribution of goods - =MRS, resource allocation - =MRS of L&C and output - MRS=MRT

Question 3

Pigou

Answer 3

1. Income equality will increase economic welfare under the conditions. ( diminishing MU of money, interpersonal utility comparison, govt. intervention - Pigouvian tax)
2. Social and private MC and MB ( optimal to SMC=MPC & SMB=MPB)