Gains From Trade
Quantifying Welfare E ects
Welfare in Equilibrium
Say what? not?
Reservation-price curve =6
Reservation-price curve describes sequential purchases of single units
Demand curve describes willingness-to-pay for q units purchased simultaneously?
Q: What difference does it make? A: Income effects.
But. . . in our example, utility is quasilinear in income, so there are no income effects & CS is an exact measure of gains from trade.