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assumption of first fundamental theorem of welfare economics


parveez lone 24th Mar, 2020
Answer (1)
KUNAL LANJEWAR 24th Mar, 2020

Hello,

The first Fundamental theorem of Welfare Economics is based on two assumptions:

  1. In the economy, all commodities are competitive. The equilibrium in the economy is Pareto efficient.
  2. There is market for all commodities. Each commodity is produced in the economy and consumption of commodity ads to utility function.

Best Wishes.

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