Ch-16 Slides - Chapter Sixteen General Equilibrium Theory...

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General Equilibrium Theory Chapter Sixteen Chapter Sixteen
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Chapter Sixteen Overview 1. General Equilibrium – Analysis I Partial Equilibrium Bias 2. General Equilibrium – Analysis II The Efficiency off Competition The Edgeworth Box Analysis of Allocation: A Pure Exchange Economy 1. General Equilibrium – Analysis I Partial Equilibrium Bias 2. General Equilibrium – Analysis II The Efficiency off Competition The Edgeworth Box Analysis of Allocation: A Pure Exchange Economy Chapter Sixteen
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Chapter Sixteen Partial vs. General Equilibrium If there are spillover effects from one market to another, then the effects of a change in one market on the economy must be analyzed by examining its effect on all markets If there are spillover effects from one market to another, then the effects of a change in one market on the economy must be analyzed by examining its effect on all markets
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Chapter Sixteen Partial vs. General Equilibrium Further, many exogenous events (or policy changes) affect many markets simultaneously (example: discovery of a major oil deposit that raises the income of all citizens in an economy and so affects equilibrium in all markets). If we do not take into account all markets in our equilibrium calculation, we induce a bias in our analysis Further, many exogenous events (or policy changes) affect many markets simultaneously (example: discovery of a major oil deposit that raises the income of all citizens in an economy and so affects equilibrium in all markets). If we do not take into account all markets in our equilibrium calculation, we induce a bias in our analysis
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Chapter Sixteen Partial vs. General Equilibrium Definition: General Equilibrium analysis is the study of how equilibrium is determined in all markets simultaneously (e.g. product markets and labor markets). Definition: Partial Equilibrium analysis is the study of how equilibrium is determined in only a single market (e.g. a single product market). Definition: General Equilibrium analysis is the study of how equilibrium is determined in all markets simultaneously (e.g. product markets and labor markets). Definition: Partial Equilibrium analysis is the study of how equilibrium is determined in only a single market (e.g. a single product market).
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Chapter Sixteen Partial vs. General Equilibrium Coffee and tea are substitutes. Initially, the equilibrium prices are $0.93 per pound for coffee and $0.63 per pound for tea.
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This note was uploaded on 07/17/2008 for the course ECON 501.02 taught by Professor Yang during the Winter '08 term at Ohio State.

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Ch-16 Slides - Chapter Sixteen General Equilibrium Theory...

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