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Edgeworth Box
In economics, an Edgeworth box, sometimes referred to as an Edgeworth-Bowley box, is a graphical representation of a market with just two commodities, ''X'' and ''Y'', and two consumers. The dimensions of the box are the total quantities Ω''x'' and Ω''y'' of the two goods. Let the consumers be Octavio and Abby. The top right-hand corner of the box represents the allocation in which Octavio holds all the goods, while the bottom left corresponds to complete ownership by Abby. Points within the box represent ways of allocating the goods between the two consumers. Market behaviour will be determined by the consumers' indifference curves. The blue curves in the diagram represent indifference curves for Octavio, and are shown as convex from his viewpoint (i.e. seen from the bottom left). The orange curves apply to Abby, and are convex as seen from the top right. Moving up and to the right increases Octavio's allocation and puts him onto a more desirable indifference curve while placing ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Kenneth Arrow
Kenneth Joseph Arrow (23 August 1921 – 21 February 2017) was an American economist, mathematician, writer, and political theorist. He was the joint winner of the Nobel Memorial Prize in Economic Sciences with John Hicks in 1972. In economics, he was a major figure in post-World War II neo-classical economic theory. Many of his former graduate students have gone on to win the Nobel Memorial Prize themselves. His most significant works are his contributions to social choice theory, notably "Arrow's impossibility theorem", and his work on general equilibrium analysis. He has also provided foundational work in many other areas of economics, including endogenous growth theory and the economics of information. Education and early career Arrow was born on 23 August 1921, in New York City. Arrow's mother, Lilian (Greenberg), was from Iași, Romania, and his father, Harry Arrow, was from nearby Podu Iloaiei. The Arrow family were Romanian Jews. His family was very supportive of ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Pareto Optimal
Pareto efficiency or Pareto optimality is a situation where no action or allocation is available that makes one individual better off without making another worse off. The concept is named after Vilfredo Pareto (1848–1923), Italian civil engineer and economist, who used the concept in his studies of economic efficiency and income distribution. The following three concepts are closely related: * Given an initial situation, a Pareto improvement is a new situation where some agents will gain, and no agents will lose. * A situation is called Pareto-dominated if there exists a possible Pareto improvement. * A situation is called Pareto-optimal or Pareto-efficient if no change could lead to improved satisfaction for some agent without some other agent losing or, equivalently, if there is no scope for further Pareto improvement. The Pareto front (also called Pareto frontier or Pareto set) is the set of all Pareto-efficient situations. Pareto originally used the word "optimal" for ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Edgeworth Box
In economics, an Edgeworth box, sometimes referred to as an Edgeworth-Bowley box, is a graphical representation of a market with just two commodities, ''X'' and ''Y'', and two consumers. The dimensions of the box are the total quantities Ω''x'' and Ω''y'' of the two goods. Let the consumers be Octavio and Abby. The top right-hand corner of the box represents the allocation in which Octavio holds all the goods, while the bottom left corresponds to complete ownership by Abby. Points within the box represent ways of allocating the goods between the two consumers. Market behaviour will be determined by the consumers' indifference curves. The blue curves in the diagram represent indifference curves for Octavio, and are shown as convex from his viewpoint (i.e. seen from the bottom left). The orange curves apply to Abby, and are convex as seen from the top right. Moving up and to the right increases Octavio's allocation and puts him onto a more desirable indifference curve while placing ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Perfect Competition
In economics, specifically general equilibrium theory, a perfect market, also known as an atomistic market, is defined by several idealizing conditions, collectively called perfect competition, or atomistic competition. In theoretical models where conditions of perfect competition hold, it has been demonstrated that a market will reach an equilibrium in which the quantity supplied for every product or service, including labor, equals the quantity demanded at the current price. This equilibrium would be a Pareto optimum. Perfect competition provides both allocative efficiency and productive efficiency: * Such markets are ''allocatively efficient'', as output will always occur where marginal cost is equal to average revenue i.e. price (MC = AR). In perfect competition, any profit-maximizing producer faces a market price equal to its marginal cost (P = MC). This implies that a factor's price equals the factor's marginal revenue product. It allows for derivation of the sup ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Local Nonsatiation
In microeconomics, the property of local nonsatiation of consumer preferences states that for any bundle of goods there is always another bundle of goods arbitrarily close that is strictly preferred to it.''Microeconomic Theory'', by A. Mas-Colell, et al. Formally, if X is the consumption set, then for any x \in X and every \varepsilon>0, there exists a y \in X such that \, y-x \, \leq \varepsilon and y is strictly preferred to x. Several things to note are: # Local nonsatiation is implied by monotonicity of preferences. However, as the converse is not true, local nonsatiation is a weaker condition. # There is no requirement that the preferred bundle ''y'' contain more of any good – hence, some goods can be "bads" and preferences can be non-monotone. # It rules out the extreme case where all goods are " bads", since the point ''x'' = 0 would then be a bliss point. # Local nonsatiation can only occur either if the consumption set is unbounded or open (in other words, it ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Utility
As a topic of economics, utility is used to model worth or value. Its usage has evolved significantly over time. The term was introduced initially as a measure of pleasure or happiness as part of the theory of utilitarianism by moral philosophers such as Jeremy Bentham and John Stuart Mill. The term has been adapted and reapplied within neoclassical economics, which dominates modern economic theory, as a utility function that represents a single consumer's preference ordering over a choice set but is not comparable across consumers. This concept of utility is personal and based on choice rather than on pleasure received, and so is specified more rigorously than the original concept but makes it less useful (and controversial) for ethical decisions. Utility function Consider a set of alternatives among which a person can make a preference ordering. The utility obtained from these alternatives is an unknown function of the utilities obtained from each alternative, not the su ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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