There are many combinations of value to consumers, trade, production, and a combination of factors, consistent with the input efficiency. Indeed, there is a third terbatasan from consumers and the balance of production that generate Pareto optimal. There is a lot of Optimal point range limit the possibility of aggregate production. Therefore, Pareto efficiency is needed, but not one that meets the conditions for social welfare. Each Pareto optimal related to the distribution of income in a different economy. Some may involve a large imbalance of income. So how do we decide Pareto optimal which the most desired? The decision was made, both secretly and openly, when we set the function of social welfare. This function is the value of tangible decisions about the value to the inter-personal relationships. Social welfare function is a way of mathematics in the interest of relative states of individuals in the community.
A function to the welfare of the value (also called a welfare function Benthamite) up to the value of each individual in order to obtain the overall welfare of the community. All people are treated the same, the problem is not on the level of initial value to them. One unit of value for an additional order that the poor did not see any value greater than one additional unit of value in order for a millionaire who has all the wealth that he had to spend.
At the other extreme is the Max-Min proposed by John Rawls. According to the criteria of Max-Min, if the welfare Maximize value to the community members that have the most value to small is the largest. No economic activity will increase social welfare activities unless it improve the position of the members of the community worse (losers). Most economists define a function of social welfare is the middle between these two extremes.
Social welfare function is typically translated into the curve indiferens such a way that can be used in the same space as a graphical function that other inter-related. A curve indiferens social value to the Linear and slash to the bottom that leads to the right. Curve indiferens social Max-Min take the form of two straight lines that have formed so that a 90 degree angle. A social indiferens curve drawn from a social welfare function is between a slash to the bottom that leads to the right.
The shape of the curve between the social indiferensi can be increased as the imbalance, a large increase in the value of the individual to the relatively rich needed to replace the loss of value to individuals who are relatively poor. A social welfare function that can be built with a rough measure of subjective value of dollars of goods and services that are distributed to the players in the economy
A function to the welfare of the value (also called a welfare function Benthamite) up to the value of each individual in order to obtain the overall welfare of the community. All people are treated the same, the problem is not on the level of initial value to them. One unit of value for an additional order that the poor did not see any value greater than one additional unit of value in order for a millionaire who has all the wealth that he had to spend.
At the other extreme is the Max-Min proposed by John Rawls. According to the criteria of Max-Min, if the welfare Maximize value to the community members that have the most value to small is the largest. No economic activity will increase social welfare activities unless it improve the position of the members of the community worse (losers). Most economists define a function of social welfare is the middle between these two extremes.
Social welfare function is typically translated into the curve indiferens such a way that can be used in the same space as a graphical function that other inter-related. A curve indiferens social value to the Linear and slash to the bottom that leads to the right. Curve indiferens social Max-Min take the form of two straight lines that have formed so that a 90 degree angle. A social indiferens curve drawn from a social welfare function is between a slash to the bottom that leads to the right.
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