Ch02 EFFICIENCY, MARKETS, AND GOVERNMENTS（课件）- 《财政金融英文版》同步教学（人民大学版）

EFFICIENCY, MARKETS, AND GOVERNMENTS C h a p t e r 2 Positive Economics Scientific approach to analysis that establishes cause-and-effect relationships among economic variables Attempts to be objective Formulates “If…then” hypotheses that can be checked against facts Useful to the normative approach in that it cannot make recommendations to achieve certain outcomes without an underlying theory of human behavior Normative Economics Designed to formulate recommendations as to what should be accomplished Not objective Begins with predetermined criteria and is used to prescribe policies that best achieve those criteria Useful to the positive approach in that it defines relevant issues The Efficiency Criterion Normative criterion for evaluating effects of resource use on individual well-being Satisfied when resources are used in such a way as to make it impossible to increase the well-being of any one person without reducing the well-being of another Often referred to as the criterion of Pareto optimality Marginal Conditions for Efficiency Total social benefit – any given quantity of an economic good available in a give time period will provide satisfaction to those who consume it Marginal social benefit – the extra benefit by making one more unit of that good available in a given time period Total social cost – the value of all resources necessary to make a given amount of the good available Marginal social cost – minimum sum required to compensate the owners of inputs used for making an extra unit of the good available Efficient Output Efficient Output Markets In a perfectly competitive market: All productive resources are privately owned. All transactions take place in markets, in which competing sellers offer a standardized product to many buyers. Economic power is dispersed in that no single buyer or seller can influence prices. All relevant information is available to buyers and sellers. Resources are mobile and may be freely employed in any enterprise. Ineffici