nlecture13 - general equilibrium

nlecture13 - general equilibrium - Topic 6: Competitive...

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opic 6: Competitive Markets (2) Topic 6: Competitive Markets (2) Introduction to general equilibrium USC Marshall
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Introduction to general equilibrium So far: – Analyzed markets in isolation – But the economy is a collection of interdependent markets • Consumer choice and producer choice are determined given the overall vector of prices Today: – How developments in one market trickle to other arkets markets • How much a $0.50 tax on gasoline will affect the emand for SUVs? USC Marshall demand for SUVs?
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Introduction to general equilibrium General Equilibrium Analysis: – The study of competitive equilibrium in many markets at the same time • Understand the consequences of interdependencies among markets –The price of one good can affect the demand r another for another –The price of one good can affect the cost of roducing another producing another – While in practice, all markets are interdependent, generally focus on markets that are clearly USC Marshall dependent
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General equilibrium analysis • What is the general equilibrium in the market for gasoline and SUVs, if – The demand and supply of gasoline are given by Q gas d 27 3 P gas P SUV Q gas s P gas 3 – And the demand and supply of SUVs are given by Q UV d 8 1 P 1 P as SUV 2 SUV 5 gas Q SUV s 1 5 P SUV 2 USC Marshall
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General equilibrium analysis P gas P SUV P* gas P* SUV Q gas Q SUV Q* gas Q* SUV USC Marshall
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General equilibrium analysis e know that for markets to clear, it needs to We know that for markets to clear, it needs to be that: as d as s UV d s – Using these market-clearing conditions, we get combinations of P gas and P SUV that clear each of Q gas Q gas , Q SUV Q SUV the markets USC Marshall
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General equilibrium analysis P gas P gas Q gas P SUV D(P SUV =18) USC Marshall
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General equilibrium analysis P gas P gas P* gas =3 Q gas P SUV D(P SUV =18) USC Marshall
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General equilibrium analysis P gas P gas P* gas =3 3 Q gas P SUV D(P SUV =18) 18 USC Marshall
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General equilibrium analysis P gas P gas D(P SUV =10) P* gas =3 P* gas =5 3 5 Q gas P SUV D(P SUV =18) 18 10 USC Marshall
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General equilibrium analysis P gas P gas * as =7 7 D(P SUV =10) D(P SUV =2) P* gas =3 P* gas =5 P gas 7 3 5 Q gas P SUV D(P SUV =18) 18 10 2 USC Marshall
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General equilibrium analysis P gas P gas
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This note was uploaded on 03/09/2009 for the course BUAD 351 taught by Professor Eastin during the Spring '07 term at USC.

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nlecture13 - general equilibrium - Topic 6: Competitive...

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