Micro16 - Chapter16GeneralEquilibrium&EconomicEfficiency

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Chapter 16   Partial Equilibrium:    Activity in one market does not  affect other markets.  Market for corn is assumed to be  independent of market for soybean. General Equilibrium:    Determines prices and quantities  in all markets simultaneously.  It emphasizes the “ feed  back effect ”.  That is, price and quantity adjustment in  one market causes price and quantity adjustment in  related markets. A shock to a market not only disturbs the markets for the  substitute and complement goods, it also affects the  resource markets and impacts every other market.   Main Question of the Chapter:    What is efficiency and what  are the conditions that an economy should satisfy if it is to  produce and distribute goods efficiently?
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Chapter 16   General Equilibrium:   A tax increase in movie tickets will shift the supply in movie  market to left and will increase ticket prices.  This will increase demand in video  rental market to Dv’ and price of video rentals will increase, resulting in increase  in demand in market (a) shifting to DM’.  The dynamic process will continue until  the final equilibrium achieved at QM* and PM*.
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Chapter 16   Food Fun MRS Jim 9 1 3 Jane 1 4 ½ MRS is marginal rate of substitution. How much of one good a consumer is willing to give up in return for a unit of the other good. If Jim trades food for fun with Jane, both will benefit from trade.  
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Micro16 - Chapter16GeneralEquilibrium&EconomicEfficiency

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