First Fundamental Welfare Theorem(redirected from 1st Fundamental Welfare Theorem)
First Fundamental Welfare Theorem
The theory that a market equilibrium (that is, when the number of buyers equals the number of sellers) is always Pareto efficient. That is, in market equilibrium, no other allocation of resources can improve the lot of one economic actor without hurting the lot of another economic actor. The first fundamental welfare theorem states that the free market tends to assign resources in the most efficient way possible.