Courseworks

Classical view recognizes unemployment where unemployment is caused by excess supply triggered by a high price level of labor. Classical economists believed that full employment could be achieved if forces of demand and supply were left to adjust on their own in order to reach an equilibrium wage. (more…)

1. Also referred as the invisible hand theorem, it holds that any competitive equilibrium results to a Pareto efficiency in resource allocation. Pareto efficiency is achieved when there is no further room for improvement, meaning that it is at optimum efficiency level. The central idea in the First Fundamental Theorem is that markets can create a situation of social optimum in which no government intervention is required. Under such circumstances, the government should implement leissez faire policies. However, proponents of government regulations hold that the assumptions required to achieve this theorem are not achievable in real life situations. Notably, a situation where a single economic player holds all the goods at the expense of the rest exemplifies Pareto efficiency but is not a perfect situation under welfare economics. (more…)