141_Chapter_12_Lecture_Outline

141_Chapter_12_Lecture_Outline - 12 General Equilibrium and...

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12 General Equilibrium and the Efficiency of Perfect Competition OUTLINE OF TEXT MATERIAL I. Introduction A. Markets   and   products   are   heavily   interdependent.   The   demand   for   auto  mechanics depends on the demand for automobiles, the ability and willingness of  people to repair their own cars, income, and a host of other factors. Input and  output markets cannot be considered as if they operated independently. We now  need to look at the operation of the system as a whole. B. Chapters   3   through   11   use   partial   equilibrium   analysis ,   examining   the  characteristics of equilibrium in individual markets without much concern for  how the different markets interact. C. general equilibrium  exists when all markets in an economy are in simultaneous  equilibrium. 1. An event that disturbs the equilibrium in one market will probably disturb  the equilibrium in other markets as well. 2. The ultimate impact of the event depends on the ways in which various  markets adjust to it. II. General Equilibrium Analysis Two examples to illustrate general equilibrium analysis: A. An Early Technological Advance: The Electronic Calculator B. Market Adjustment to Changes in Demand C. Formal Proof of a General Competitive Equilibrium 121
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141_Chapter_12_Lecture_Outline - 12 General Equilibrium and...

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