Abstract
Changes in total surplus are traditional measures of economic welfare. We propose necessary and sufficient conditions for rationalizing individual and aggregate consumer demand data with individual quasilinear and homothetic utility functions. Under these conditions, consumer surplus is a valid measure of consumer welfare. For nonmarketed goods, we propose necessary and sufficient conditions on input market data for efficient production, i.e. production at minimum cost. Under these conditions we derive a cost function for the nonmarketed good, where producer surplus is the area above the marginal cost curve.
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© 2008 Springer-Verlag Berlin Heidelberg
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Brown, D.J., Calsamiglia, C. (2008). The Nonparametric Approach to Applied Welfare Analysis. In: Computational Aspects of General Equilibrium Theory. Lecture Notes in Economics and Mathematical Systems, vol 604. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-76591-2_4
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DOI: https://doi.org/10.1007/978-3-540-76591-2_4
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-76590-5
Online ISBN: 978-3-540-76591-2
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