Understanding Markets and Welfare

This lecture delves into the dynamics of markets, focusing on inflation, changes in market equilibrium triggered by supply and demand movements, and the impact on prices and quantities. The instructor explains how markets operate, the concept of equilibrium, and the role of central planners in maximizing welfare. The lecture also covers normative aspects of market behavior, the concept of willingness to pay as a measure of welfare, and the implications of market imperfections. Additionally, the discussion extends to non-market goods, such as environmental resources and public sector services, highlighting the challenges of valuing goods outside traditional market mechanisms.