Question

2. Discuss the relevance of the First and Second Fundamental Theorems of Welfare Economics to Bernie Sanders

proposals to change tax policy to benefit the middle class.

Bernie Sanders proposals is tax to the wealthy to provide good to the middle and lower income people. plaese make this short and simple

Answer 1

First fundamental theorem states that markets will turn efficient and have competitive equilibrium with no transaction costs and perfect information.

Second fundamental theorem is the opposite wherein efficient allocation of resources can lead to competitive equilibrium.

Thus according to Bernie Sanders, even if tax is imposed on wealthy who are essentially firm owners, the firms will tend to be competitive and find equilibrium production and output functions even when they are taxed heavily. Thus even if government intervenes through tax policy, wealth will be redistributed and efficiency attained through the welfare mechanism theorem.