The actions people take are determined by potential welfare gains.  Indeed, the gains from trade are what brings buyers and sellers together in markets.  Unfortunately, however, not all private actions raise social welfare when markets are subject to taxes of other distortions.  This course obtains general equilibrium shadow (or social) prices to identify welfare improving policy changes in these circumstances.

Students who successfully complete this course will:

• understand the different ways to measure welfare changes for individuals and know how to aggregate them;
• be able to properly interpret compensated welfare changes and know how they relate to actual welfare changes typically isolated in demand-supply diagrams;
• understand how to construct models and use general equilibrium analysis;
• use general equilibrium analysis to evaluate the welfare effects of policy changes in a coherent way and be able to explain the economic intuition for the results;
• be exposed to the applied welfare and public economics literatures and be able to relate the two literatures using conventional welfare economics tools.

• three (3) hour exam at the end of semester
• two assignments - 25% in total

3 contact hours plus private study time.

At least an average of 65% (or equivalent) in the final two years of an Australian undergraduate degree with introductory level courses in Economics, Statistics and Econometrics.

Jones, C.M., (2005), Applied Welfare Economics, Oxford University Press, Oxford, UK.

Tresch, R.W., (2002), Public Finance: A Normative Theory, Elsevier Science Academic Press, San Diego and London, 2^nd Edn.

Please see Course Website