General Equilibrium - Missouri State University

General Equilibrium - Missouri State University

Review Notes – General Equilibrium • Two Conclusions from the Section Voluntary exchange is mutually beneficial Voluntary exchange results in efficie...

84KB Sizes 0 Downloads 12 Views

Recommend Documents

Market Equilibrium and Applications - Missouri State University
equilibrium generally relates to all types of situations and economic models, not just ... When the actual price exceeds

Review Notes – Exchange General Equilibrium - Missouri State
When equilibrium conditions are not met, what happens? • What conditions hold at equilibrium? (Hint: compare MRS for b

General Equilibrium
1 General Equilibrium in a Pure Exchange Economy. 1. 1.1 Exchange . ...... Now consider the competitive equilibrium of t

General Equilibrium
Application to Quasi-equilibrium Existence for Private Ownership Economies. 3.3. ... General equilibrium is a central co

General Equilibrium
Walras' law). Therefore, because prices are non-negative, there must be at least one good l for which Σi xi l > Σi xi

Missouri Western State University
to www.missouriwestern.giftplans.org contact Jerry Pickman at ... Melissa Rewinkel Taylor '93, Ralph Schank '82, Tom. Sc

Southeast Missouri State University
Mail or Fax this Form to: Southeast Missouri State University. Office of the Registrar. One University Plaza, MS 3760. C

Germany - Missouri State University
Program Fee: $3,570. Program Fee Includes: Transportation from. Berlin-Tegel airport, stay with a host family including

Memorandum - Missouri State University
Introduction. In this report, I will discuss the target audience for the Entangled Teen Booklet. The booklet will have a

Untitled - Missouri State University
Cow/Calf series, see MU publication M147, University Extension and. Your Beef ...... cult to save the leaves when soybea

Review Notes – General Equilibrium •

Two Conclusions from the Section Voluntary exchange is mutually beneficial Voluntary exchange results in efficiency



What are the benefits of exchange? Assumptions of the model • 2 consumers, 2 goods • initial endowments and MRS for both What is an Edgeworth Exchange Box? • Make sure you know how the box works – what is on each axis? How is each consumer’s consumption measured for each good? • How are preferences for each consumer shown? • How does the model demonstrate that voluntary trade is mutually beneficial? • What is the contract curve? • How does the contract curve show pareto efficiency (what’s that?) Exchange using markets in an Edgeworth Box Diagram • Both consumers choose their optimum consumption given endowments and market prices. • If either market is not in equilibrium, then new market prices occur until reach equilibrium • At equilibrium QD=QS for each good (i.e., neither excess demand or supply for either good). What do we know about exchange from the model? • First Theorem of Welfare Economics o All competitive market equilibriums are efficient (why?) • Second Theorem of Welfare Economics o All efficient outcomes (allocation of goods between consumers) can be achieved by appropriately changing market conditions What must be done to relative prices? What must be done to endowments (i.e., redistribution of income) • What are the implications of these two theorems?