Another Handout on General Equilibrium

Another Handout on General Equilibrium - ECONOMICS 201 More...

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Unformatted text preview: ECONOMICS 201 More Notes on General Equilibrium G. Jehle In the one-man, perfectly-competitive Robinson Crusoe economy, Robinson’s labor, l , must be used to produce the output, q , he consumes. • Robinson, as producer, buys labor, l d , on the competitive labor market and uses it to produce output, q s , that he sells on the competitive output market. • Robinson, as worker-consumer, works to earn money to buy the things he consumes; he sells his labor, l s , on the competitive labor market and, with his earnings and the profit he earns from his firm, buys q d on the competitive output market to consume. Let Robinson’s preferences and production possibilities be: u ( l,q ) = q 1 / 2 (24- l ) 1 / 2 , for 0 ≤ l ≤ 24 , f ( l ) = 5 √ 2 l, where the absolute value of the slope of an indifference curve in the ( l,q )-plane (the MRS ) and the slope of the production possibilities frontier (the MPL ) are, respectively, MRS = q 24- l and MPL = 5 √ 2 l ....
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This note was uploaded on 04/26/2010 for the course ECON 101 taught by Professor Staff during the Spring '08 term at Vassar.

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Another Handout on General Equilibrium - ECONOMICS 201 More...

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