lecture18_slides

lecture18_slides - Econ 121. Intermediate Microeconomics....

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Unformatted text preview: Econ 121. Intermediate Microeconomics. Eduardo Faingold Yale University Lecture 18 Outline of the course I. Introduction II. Individual choice III. Competitive markets IV. Market failure Outline of the course I. Introduction II. Individual choice III. Competitive markets Partial equilibrium (Ch. 16) Exchange economies (Ch. 31) Production (Ch. 1823) EfFciency and equilibrium with production (Ch. 32) IV. Market failure A simple economy with production 2 consumers, A and B 2 consumption goods, 1 and 2, which A and B care about J 1 frms, labeled j D 1;::: ;J N input goods, n D 1;:: :;N , which the frms can use to produce consumption goods 1 and 2 Consumption goods may or may not be in positive net supply: ! 1 0; ! 2 0: Inputs goods are in positive net supply: N I 1 > 0; N I 2 > 0;::: ; N I N > 0 A simple economy with production Preferences u A .x A 1 ;x A 2 / and u B .x B 1 ;x B 2 / Technology constraints of Frm j : y j 1 D f j 1 .I j;1 1 ;:: :;I j;1 N / y j 2 D f j 2 .I j;2 1 ;:: :;I j;2 N / where y j i D # of units of consumption good i produced by Frm j I j;i n D # of units of input n used by Frm j in the production of cons. good i Thus, Frms are heterogeneous in their technologies. Resource constraints Consumption good 1: x A 1 C x B 1 D y 1 1 C y 2 1 C :: : C y J 1 D J X j D 1 y j 1 Consumption good 2: x A 2 C x B 2 D y 1 2 C y 2 2 C :: : C y J 2 D J X j D 1 y j 2 Input n D 1;: ::;N : J X j D 1 .I j;1 n C I j;2 n / D N I n Thus, we have 2 C N resource constraints. Allocations An allocation is a list .x A ;x B ;I 1;1 ;: :: ;I J;1 ;I 1;2 ;:: :;I J;2 ;y 1 ;: ::;y J / comprising: a consumption bundle for each consumer: x A D .x A 1 ;x A 2 /; x B D .x B 1 ;x B 2 / an output bundle for each Frm j D 1;: ::;J : y j D .y j 1 ;y j 2 / an input bundle for each Frm j D 1;: ::;J and each consumption good i D 1;2 : I j;i D .I j;i 1 ;:: :;I j;i N / Pareto efFciency An allocation .x A ;x B ;I 1;1 ;: ::;I J;1 ;I 1;2 ;:: :;I J;2 ;y 1 ;: ::;y J / is feasible if it satisFes the technology constraints and the resource constraints.it satisFes the technology constraints and the resource constraints....
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This note was uploaded on 03/01/2012 for the course ECON 121 taught by Professor Samuelson during the Spring '09 term at Yale.

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lecture18_slides - Econ 121. Intermediate Microeconomics....

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