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In microeconomics, economic efficiency, depending on the context, is usually one of the following two related concepts: [1] Allocative or Pareto efficiency : any changes made to assist one person would harm another.
The production function is central to the marginalist focus of neoclassical economics, its definition of efficiency as allocative efficiency, its analysis of how market prices can govern the achievement of allocative efficiency in a decentralized economy, and an analysis of the distribution of income, which attributes factor income to the ...
A Robinson Crusoe economy is a simple framework used to study some fundamental issues in economics. [1] It assumes an economy with one consumer, one producer and two goods. The title "Robinson Crusoe" is a reference to the 1719 novel of the same name authored by Daniel Defo
By doing so, it defines productive efficiency in the context of that production set: a point on the frontier indicates efficient use of the available inputs (such as points B, D and C in the graph), a point beneath the curve (such as A) indicates inefficiency, and a point beyond the curve (such as X) indicates impossibility.
The income growth caused by increased production volume is determined by moving along the production function graph. The income growth corresponding to a shift of the production function is generated by the increase in productivity. The change of real income so signifies a move from the point 1 to the point 2 on the production function (above).
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.
Where is aggregate expenditures, is autonomous expenditures , is the marginal propensity to spend (the fraction of additional income spent), and is national income (or economic output). Since b < 1 {\displaystyle b<1} the angle of this line will always be less than 45 degrees.
Economic graphs are presented only in the first quadrant of the Cartesian plane when the variables conceptually can only take on non-negative values (such as the quantity of a product that is produced). Even though the axes refer to numerical variables, specific values are often not introduced if a conceptual point is being made that would ...