Question

Say a policy change makes some consumers better off but others worse off.  With just this information, would the economist say that the policy increases social welfare? --22--

Why? --23--

Suppose that if all cars have catalytic converters on them, air quality in a city will increase by 20%.  A person's WTP for this improvement in air quality is $300 a year.  To have a catalytic converter on their car, a person has to pay $225 a year.  What does requiring people to have catalytic converters on their cars do to this person's welfare?

Nicholas Kaldor argued that a certain principle can be used to determine if a policy should or shouldn't be adopted.  What principle is that? The --25-- principle

Answer 1

If a policy change makes some consumers better off but make others worse off, then is obviously a wrong move by any economy. Because this conevenpt is related to pareto inefficient theory which states that only that policy or step must be adopted or taken which makes someone better off without making someone else worse off. So, it does not lead to any social welfare and rather it would a bluff move by any economy because it would not make any difference at all. Just assume that your family earns $100000 per month and its deposited in your father's bank account, if you would transfer the entire concerned amount or even a part of it to your mother's bank account, would it make any difference to the family income? No, that is why, for an economy as well, if any such step is taken which makes someone better off but making someone else worse off, then it should not be adopted or taken as it would make no difference to the economy.

As ler the policies, I'm just supposed to answer only one question.