What is market equilibrium maximizes social welfare

Reference no: EM133435959

Assignment:

For mainstream economists, the theory of equilibrium shows why capitalism is the best possible economic system. What assumptions must be true for the market to reach equilibrium on its own (this was discussed in the video for the week towards the end)? Are these assumptions realistic? Furthermore, what is actually meant by saying that market equilibrium maximizes social welfare-- what exactly is being maximized? Given everything we've learned in class so far, what might be some issues with using the maximization of this (thing/concept that is maximized at equilibrium) as a measurement for welfare?

Reference no: EM133435959

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