Community indifference curve

A community indifference curve is an illustration of different combinations of commodity quantities that would bring a whole community the same level of utility. The model can be used to describe any community, such as a town or an entire nation. In a community indifference curve, the indifference curves of all those individuals are aggregated and held at an equal and constant level of utility.

History

Invented by Tibor Scitovsky, a Hungarian born economist, in 1941.

Solving for a CIC

A community indifference curve (CIC) provides the set of all aggregate endowments needed to achieve a given distribution of utilities, . The community indifference curve can be found by solving for the following minimization problem:

CICs assume allocative efficiency amongst members of the community. Allocative Efficiency provides that . The CIC comes from solving for in terms of , .

Community indifference curves are an aggregate of individual indifference curves.


See also

References

Albouy, David. "Welfare Economics with a Full Production Economy." Economics 481. Fall 2007.

Deardorff's Glossary of International Economics.


This article is issued from Wikipedia. The text is licensed under Creative Commons - Attribution - Sharealike. Additional terms may apply for the media files.