CHAP02_Gruber2e.ppt

Constrained Utility Maximization Constrained Utility Maximization Constrained Utility Maximization Constrained Utility Maximization Constrained Utility Maximization Constrained Utility Maximization Constrained Utility Maximization Constrained Utility Maximization Constrained Utility Maximization Constrained Utility Maximization Constrained Utility Maximization Constrained Utility Maximization Constrained Utility Maximization Constrained Utility Maximization Constrained Utility Maximization Putting the Tools to Work: TANF and Labor Supply Among Single Mothers Putting the Tools to Work: TANF and Labor Supply Among Single Mothers Putting the Tools to Work: TANF and Labor Supply Among Single Mothers Putting the Tools to Work: TANF and Labor Supply Among Single Mothers Equilibrium and Social Welfare Equilibrium and Social Welfare Equilibrium and Social Welfare Equilibrium and Social Welfare Equilibrium and Social Welfare Equilibrium and Social Welfare Equilibrium and Social Welfare Equilibrium and Social Welfare Equilibrium and Social Welfare Equilibrium and Social Welfare Equilibrium and Social Welfare Equilibrium and Social Welfare Equilibrium and Social Welfare Equilibrium and Social Welfare Equilibrium and Social Welfare Equilibrium and Social Welfare Equilibrium and Social Welfare Equilibrium and Social Welfare Equilibrium and Social Welfare Welfare Implications of Benefit Reductions: The TANF Example Continued Welfare Implications of Benefit Reductions: The TANF Example Continued Conclusion 2 . 3 Producer Surplus producer surplus The benefit that producers derive from selling a good, above and beyond the cost of producing that good. 2 . 3 Producer Surplus 2 . 3 Social Surplus total social surplus (social efficiency) The sum of consumer surplus and producer surplus. 2 . 3 Social Surplus 2 . 3 Competitive Equilibrium Maximizes Social Efficiency First Fundamental Theorem of Welfare Economics The competitive equilibrium, where supply equals demand, maximizes social