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Q. Define Heterogeneity?
We know that breaking of the assumptions of homogeneity of agents, in welfare economics, makes it difficult to define social welfare function. Breaking of the assumption of homogeneity means we are going to accept that agents are not homogeneous, i.e., not identical in their tastes and preferences, incomes and intellectual grounds, in other words, they are heterogeneous.
Remember, this heterogeneity is the cause of conflict. Conflict is the cause of political existence. Its importance has been appreciated in some economic literature of public policy. Atkinson and Stieglitz (1900), for example, write, "If everyone had identical tastes and endowments, then many public finance questions would lose their significance, and this is particularly true of the behaviour of the state. If the interests of the members of society could be treated as those of ‘representative' individual, then the role of state would be reduced to that of efficiently carrying out agreed decision."
What are the properties and limitations of GDP as a social welfare function?
Q. Why does government undertake an economic activity? If ever an activity has large externality or spill over and includes a large number of people, it may be found better th
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State ramsey rule of optimal commodity taxation and the intuition for it
Pigovian Analysis The starting point of the Pigovian welfare analysis is the notion that there is a resource allocation problem that can be optimally solved. Through hi
externalities produced by a monopolist
explanation and justify the condition of pareto optimality and verify the defination of contrect curve. statment; reallocation of the resources from 1 efficient point to another ef
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The other type is called ex-post heterogeneity which refer to the conflict (of interests) arising due to distributional implications of the public policy. Thus when a public polic
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