Page 373 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Microeconomic Theory

Notes community.” Thus, social welfare function is the function of ordinary numerical indication welfare of
the society and individual ability. This is represented as:

W = F (U , U , ..., U ).
1 2 n
Self Assessment

Fill in the blanks:
1. Theory of Social Welfare function is presented primarily by ................................. .
2. Social welfare function theory is further developed by Arrow , Tintner and ................................. .
3. The concept of social welfare is an attempt to present idealistic study of ................................. .

Social welfare function represents those factores on which welfare of a society is assumed
to be dependent.

Where W is economic welfare of the society, F fuction is from U , U , ..., U as 1, 2, ..., n level of using
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n
the individuals. W is increasing function of these utilities.
Weighing products on both axes drawing, well behaved social indifference curves series, social welfare
fuction can be represented on figure. Every indifference curve represents different distributions of
uilitites among those indivuduals, whose level of social welfare is equal. These curves help the policy
makers in knowing that whether a particular economic policy will lead to progress or not. If any single
change can take individuals to a more high indifference curve position, then it is assumed that there is
an increase in social welfare.

Self Assessment

Multiple choice questions:
4. Bergson’s social welfare fuction is based on some difinite ....................... .
(a) assumption (b) narration (c) rituals (d) none of these
5. The concept of social welfare is an attempt to present ........................ study of welfare economics by
scientific view.
(a) idealistic (b) communist (c) economically (d) none of these
6. Every welfare curve presents the ........................ social welfare.
(a) base (b) economical status (c) level (d) none of these
7. According to Burgson’s theory, the social welfare depends upon the money and ....................... .
(a) Capital (b) Level (c) Income (d) None of these
Social welfare function is explained in Fig. 25.1. FF is utility frontier, which expresses the
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boundary of all possible utility combinations derived from given function of the economy.
It enters when many utility possibility curves covered on another. In Fig 25.1, W, W and W
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expressing the social welfare function are family of curves. Each welfare curve expresses the
focus of welfare combination of utilities of two persons A and B, for which both the individuals
are indifferent. Every welfare curve shows the level of social welfare. Welfare curve W shows
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higher level of social welfare than W and W shows higher level of social welfare then W .
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Maximum social welfare or optimum situation is that where utility frontier FF touches welfare
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