We will see that under competitive conditions market

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Unformatted text preview: n 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 maximize profits. • 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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