ABSTRACT

An important consideration to bear in mind throughout our discussion of welfare issues is that the social welfare function, which is central to our concern, is derived from the utility of members of the community, depending largely on what they consume. This, in turn, is determined by what is produced, and therefore depends on the productive resources available and the technical conditions of production. Consequently, there are various levels of efficiency to be considered. To start with, resources have to be used with maximum efficiency in production, otherwise more output is capable of being produced to the potential benefit of consumers. Secondly, the output produced needs to be allocated efficiently to consumers. Thirdly, the efficiency with which the product mix meets the demands of consumers has to be considered. Having considered all these aspects of efficiency we can then turn to the distributional issues.