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Unformatted text preview: Econ 101 Lecture 10 A closed economy model Midterm n average: 44.5 n min: 8 n max: 54 Midterm n If grades were given only based on Midterm.. n A+…A : 49 and above n B+…B : 44 and above n C+…C : 36 and above Announcements n Today we will do Chapter 5, pages 146 160 n Next time, we will do Chapter 5, pages 160185 n Problem Set 3 will be posted today, due next Wednesday Where are we? n We have looked at the consumers and firms separately n Now we want to put things together: general equilibrium analysis Competitive Equilibrium n A competitive equilibrium is: n A set of endogenous quantities ( C, Ns, Nd, T, Y ) n A set of prices ( w ) n Such that, given the exogenous variables ( G, K, z ): n Consumers maximize utility s.t. budget constraint n Firms maximize profits s.t. technological constraint n Markets clear n Ns = Nd n Y = C+G n Government budget balances Consumption Goods Market n Suppose that we ignore the Y=C+G condition. n What happens at the market for consumption goods? n i.e., supply of goods equals to the demand for goods anyway! G C T C wN wN Y s d + = + = + = + = π π Walras’ law § You have just seen Walras’ law at work: If there are N markets and N1 of them are in equilibrium, then the Nth market is also in...
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 Fall '08
 DUMBASS
 Free Market, competitive equilibrium, Vilfredo Pareto, PARETO OPTIMALITY

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