LN031110

LN031110 - Economics 113 UCSD Prof. R. Starr, Mr. Troy...

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Economics 113 Prof. R. Starr, Mr. Troy Kravitz UCSD Winter 2010 March 10, 2010 1 Lecture Notes for March 11, 2010 Generalizing our results: Futures markets, Contingent Commodity markets (Ch. 20) Core convergence (Ch. 21, 22) Set-valued supply and demand (Ch. 23, 24) Nonconvex set valued supply and demand (Ch. 25) Allows us to treat U- shaped cost curve model, preference for specialization. What have we learned? GE mainly fits into an Edgeworth Box and a Robinson Crusoe model. Quasi-linear model: 1FTWE, 2FTWE, Efficiency = Maximize Marshallian Surplus, Externalities (Pigouvian taxes and Lindahl equilibrium) and Public Goods (efficient allocation and Lindahl equilibrium) Arrow-Debreu General Equilibrium model: Modeling from the ground up. Sufficient conditions for a solution (continuity, convexity, Walras Law). Equivalence to the fixed point theorem. 1FTWE, 2FTWE, Social Choice Theory: Arrow Possibility Theorem. Single Peaked Preferences, Median Voter Theorem. What do we conclude? Formalizing our ideas can pay off. The converse is not true “Only formal ideas are useful.” Contrapositive: Ideas that defy formalization may be useful; they are a challenge to formalization. Economic Theory: Who was Gerard Debreu, and why did he have his own parking space on the Berkeley central campus?
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Economics 113 Prof. R. Starr, Mr. Troy Kravitz UCSD Winter 2010 March 10, 2010 2 Formalize concepts so that they can be understood at the logical foundations. What does mathematical general equilibrium theory do?
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LN031110 - Economics 113 UCSD Prof. R. Starr, Mr. Troy...

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