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all markets simultaneously.
• We will see that under competitive
conditions, market prices succinctly convey
all necessary information about an
unimaginably complicated reality so that all
markets are in equilibrium simultaneously. • Consumers, taking prices as given, choose
consumption goods and supply inputs (capital,
labor) to firms to maximize utility.
• Producers, taking prices as given, buy inputs from
consumers and make consumption goods to
• Consumers own firms and collect any profits
based on how many shares they own.
• In competitive equilibrium, all input and output
markets clear and firms make zero profits. Lecture 17 Econ 11--Spring 2001 3 Contingent Commodities and
Futures • Futures are commodities that are delivered at
some future time for a price paid today.
– Cattle futures
– Organ futures • Economists have constructed proofs that show that
general equilibrium exists even when contingent
and futures markets are allowed.
Econ 11--Spring 2001 Econ 11--Spring 2001 4 • Rather than showing the most general forms
of the proof of general equilibrium (which
requires advanced math), I will consider the
existence of general equilibrium in two...
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This note was uploaded on 02/11/2012 for the course ECON 51 at Stanford.
- Perfect Competition