The Foundation of Efficiency Judgements
Imagine two individuals and several possible scenarios for distributing a set of resources between them. Explain why it is impossible to determine if changing from one scenario to another constitutes an 'improvement' for the group without first knowing what each individual personally values or desires.
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Ch.5 The rules of the game: Who gets what and why - The Economy 2.0 Microeconomics @ CORE Econ
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Bruno's Preferences in the Angela-Bruno Model
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The Foundation of Efficiency Judgements
An economist is studying an interaction between two people who must decide how to divide a resource they produce together. To identify which potential divisions of the resource are Pareto-efficient, what is the most critical, initial piece of information the economist must establish?
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In an economic interaction between two individuals, an outcome that maximizes the total quantity of goods produced is, by definition, a Pareto-efficient allocation.
Two individuals, Alex and Ben, are dividing a total of 10 apples and 10 bananas. Alex's satisfaction depends only on the number of apples he has (more is better), and he is indifferent to the number of bananas. Ben's satisfaction depends only on the number of bananas he has (more is better), and he is indifferent to the number of apples. Their initial allocation is: Alex has 5 apples and 5 bananas; Ben has 5 apples and 5 bananas. Match each of the following alternative allocations to its correct description relative to this initial state.
The Subjectivity of Economic Efficiency
Critique of an Efficiency Analysis
Two city planners are evaluating a proposal to rezone a mixed-use neighborhood. Planner 1 argues the change is efficient because it will lead to a 10% increase in the total property value of the area. Planner 2 disagrees, stating that they cannot conclude the change is efficient based on this information alone. Which of the following statements best supports Planner 2's position from an economic perspective?
Evaluating a Change in Production
Self-Interested Preferences in the Angela-Bruno Model