GWLecture3

GWLecture3 - Part IIa: Paper 1 General Equilibrium and...

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Part IIa: Paper 1 General Equilibrium and Welfare Economics Dr Sönje Reiche
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Outline Summarising competitive equilibrium Cowell 6.4 Varian 32.9-32.13 Questions remaining Excess demand functions and defining equilibrium Properties of excess demand functions Cowell 7.4-7.4.2
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Competitive Equilibrium in a Closed Economy x y y x p p - Agg I.C. PPF MRT p p MRS y x = = s d x x = s d y y = Contract Curve
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Competitive Equilibrium in an Open Economy x y y x p p - y x p p MRS = d x d y y x p p MRT = s y s x Import E x p o r t
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Points to Note Spending power determined by position of PPF Well-behaved functions: concave production function indifference curves are convex only one point of tangency
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Existence: Under what circumstances can we be sure that an equilibrium exists? Uniqueness: Will an economy have only one equilibrium? Stability: Will the economy somehow “tend to” or “revert to” this equilibrium? Price Determination:
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This note was uploaded on 03/07/2012 for the course ECON 201 taught by Professor Cowell during the Spring '10 term at LSE.

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GWLecture3 - Part IIa: Paper 1 General Equilibrium and...

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