2018 Article by IMF on Digital Economy and how it is connected to Gig Economy. I extracted the Annex on consumption and welfare. Just to refresh the understanding.
Annex I. Link Between Consumption and Welfare Growth1. The level of consumption, measured by price times quantity, understates welfare because it excludes the consumer surplus. In the diagram below, the initial position of the demand curve implies a quantity consumed at price p of q0, making consumption equal to the area of rectangle c. Consumer surplus, defined as the excess of the willingness-to-pay over the amount paid, is given by the part of the area under the demand curve that is above the price line, the triangle labeled s. Welfare is measured by the area under the demand curve out to q0, c+s.
2. The growth of real consumption equals (or approximates) the welfare growth. Assume that income growth causes the demand curve to shift to the right, so that the quantity consumed becomes q1. The price is constant, so nominal consumption growth, given by (c+Δc)/c, equals real consumption growth, q1/q0. Welfare growth, given by (c+Δc+s+Δs)/(c+s), also equals real consumption growth.
3. The weights used to calculate aggregate growth of real consumption are based on prices as the measure of value. These weights allow aggregate growth to approximate the welfare growth.
Consumption and Welfare Revisited
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