The Envelope theorem is explained in terms of Shepherd's Lemma. In this case, we can apply a version of the envelope theorem. Such theorem is appropriate for following case: Envelope theorem is a general parameterized constrained maximization problem of the form Such function is explained as h(x1, x2 a) = 0. In the case of the cost function, the function [...]
The second theorem of welfare economics has certain advantages over first theorem of welfare economics. It explains that if all consumers have convex preferences and all firms have convex production possibility sets then Pareto efficient allocation can be achieved. The equilibrium of a complete set of competitive markets are suitable for redistribution of initial endowments. In the second welfare theorem, [...]
The Rybczynski Theorem (RT) says that if the endowment of some resource increases, the industry that uses that resource most intensively will increase its output while the other industry will decrease its output. The relative factor intensity is measured by the ratio of factor use in each industry. The theorem suggests that unbalanced growth in factor supplies tends, at constant [...]