Lecture19 - General Equilibrium (Welfare Economics) General...

Info iconThis preview shows pages 1–11. Sign up to view the full content.

View Full Document Right Arrow Icon
General Equilibrium (Welfare Economics)
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
General Equilibrium Partial Equilibrium: Neglects the way in which changes in one market affect other (product/factor) markets. General Equilibrium: Analyses the way in which the choices of economic agents are co-ordinated across all product and factor markets.
Background image of page 2
Agenda Exchange Economy 2 individuals/consumers (A and B) 2 products (X and Y) Production Economy 2 products (X and Y) 2 factors (L and K) General Equilibrium 2 individuals/consumers (A and B) 2 products (X and Y) 2 factors (L and K)
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Exchange Economy 2 Individuals: A and B 2 Products: Assume a world with no production and with fixed endowments of X and Y (hence the line on top of X and Y). Y X and
Background image of page 4
Edgeworth Box 1. Look at the world from Individual A’s perspective 2. Look at the world from Individual B’s perspective 3. Combine A and B’s worlds to form an Edgeworth box
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Edgeworth Box Y X Total amount of Total amount of Individual A A 1 U A 2 U
Background image of page 6
Y X Total amount of Total amount of B 1 U B 2 U Individual B Edgeworth Box Individual A
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Y X Total amount of Total amount of Individual B Edgeworth Box Individual A Each point within the box represents a particular allocation of the two products between the two individuals
Background image of page 8
Pareto Efficient Allocation Pareto Efficient Allocation: Each individual is on the highest possible indifference curve, given the indifference curve of the other individual.
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Edgeworth Box Individual A Y X Total amount of Total amount of X A Individual B Y B β α
Background image of page 10
Image of page 11
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/21/2011 for the course ECON 1230 taught by Professor Qwe during the Spring '11 term at UC Irvine.

Page1 / 40

Lecture19 - General Equilibrium (Welfare Economics) General...

This preview shows document pages 1 - 11. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online