Economic welfare theory

Economic welfare theory examines how the allocation of resources and the provision of goods and services impact the overall well-being of society. It assesses whether economic activities increase or decrease collective happiness and quality of life. The theory often uses concepts like consumer and producer surplus to measure benefits. Efficient resource distribution aims to maximize societal welfare, balancing factors such as fairness, efficiency, and equity. Policymakers use this framework to design strategies that improve living standards without causing unintended negative effects. Ultimately, it provides a structured way to evaluate the societal value of economic decisions.