ECONOMICS 201
Notes on General Equilibrium
G. Jehle
Consider a twoperson exchange economy.
1 Agent 1 has utility u1 (x, y ) and endowment e1 = (x1 , ye ). e 2 Agent 2 has utility u2 (x, y ) and endowment e2 = (x2 , ye ). e
Properties of Core Allocations
Economics 200 Macroeconomic Theory
Solutions to Problem Set 3
1. Under the assumption that this is an SOE, < < & so M )! %!< '!. National saving is given by W ] G K. We have ] &!, K "! and G #&! &! "! #&! so W &! #&! "! "(&!. Thus R \ W M "(&! '! "&! For
Economics 200 Macroeconomic Theory
Problem Set 4
Due at the beginning of class on October 9, 2007. 1. Consider an economy with a technology described by the aggregate production function ] 2O 3 P 3 . Suppose that there is no population growth or technical
Economics 200 Macroeconomic Theory
Problem Set 5
Due at the beginning of class on October 23, 2007. Our study of economic growth so far has taken the rate of population growth, 8, as a given constant. There is a tendency, however, for fertility and hence
Due at the beginning of class on November 8, 2007
Economics 200 Macroeconomic Theory
Problem Set 6
1. Consider an economy whose shortrun behavior is described by the equations G #! &] X X &] M $! "&!< Q H ] #!< T Q %! T " where all variables have the sam
Economics 200 Macroeconomic Theory
Solutions to Problem Set 6
1. (a) The autonomous spending multiplier is given by " " % multiplier is "&"5 (& $ .
" ","> .
Here , & and > 5 so the
(b) The IS curve is the set of < ] pairs such that the goods market clears
Due at the beginning of class on November 8, 2007
Economics 200 Macroeconomic Theory
Problem Set 7
1. Comment on the claim made by a reporter in the early 1980s who wrote that [a] new recession is feared because higher Pentagon spending is raising interes
Economics 200 Macroeconomic Theory
Solutions to Problem Set 7
1. As the reporter is concerned about a recession, a model of the shortrun behavior of the economy is appropriate. Consider the effects of a rise in government spending in the ISLM model illu
Due at the beginning of class on November 27, 2007
Economics 200 Macroeconomic Theory
Problem Set 8
1. Consider a small open economy with shortrun behavior described by the following relationships: ] G M K R\ G + ,] X X XE >] M D .< R \ \ 7] 9% Q 5] 0 <
Due at the beginning of class on December 6, 2007
Economics 200 Macroeconomic Theory
Problem Set 9
I claimed in class that, in the neoclassical model of the economy that we are studying, aggregate demand plays a role in determining the quantity of real GD
Economics 200 Macroeconomic Theory
Solution to Problem Set 9
Recall that, in the stickyprice model, the WVEW curve is given by T T / +"= ] ] where = is the = fraction of (KHT produced by) fixed price firms. As = decreases from unity to zero the curve be
Paul Johnson (pajohnson@vassar.edu) Blodgett Hall 126 8454375213 (Office) 9144560548 (Home)
Office Hours: Monday 3:30 PM  5:30 PM Tuesday 5:00 PM  6:30 PM or by appointment
Economics 200 Macroeconomic Theory
The goals of this course in macroeconomic
Economics 200 Macroeconomic Theory
Problem Set 3
Due at the beginning of class on September 27, 2007.
1. Find the value of the real exchange rate in the small open economy described by the following equations: ] K X G M < R\ &! "! "! #&! &] X )! %!< & "%!
Economics 200 Macroeconomic Theory
Solutions to Problem Set 2
1. The relevant model is the loanable funds market. Private saving is given by WT ] G X ] ] >] < >] " >] " >] <. Public saving is given by WK X K >] K . As ] is determined by the available qu
The nFirm Cournot Market
Introduction Suppose n rms each produce a homogeneous product with no costs of production. Let market price be linear in the combined output of all n rms in the market and of the form
n
P =ab
i=1
qi
where qi is the output of the
The 2Firm Stackelberg Market Introduction Suppose two rms each produce a homogeneous product with no costs of production. Let market price be linear in the combined output of both rms in the market and of the form P = a b(q1 + q2 ), where qi is the outpu
ECONOMICS 201 MIDTERM REVIEW Fall, 2007 V.1 Georey Jehle
Multiple choice questions on the midterm exam will be very similar to these review questions. If you can do all of these, you are on top of all your problem sets, and you know whats going on in clas
VASSAR COLLEGE
Department of Economics
Economics 201, Microeconomic Theory Fall, 2007
Georey Jehle Oce: 138 Blodgett jehle@vassar.edu Hours: Mon. 34:30 Wed. 1112:30.
General Comments This course will strengthen and extend your understanding of price theor
ECON 200
Macroeconomic Theory
Before proving the claim that in a competitive economy with an aggregate CRS production function, the payments to factors of production equal total output, recall from multivariable calculus that the total derivative of a fun
These are some additional (and entirely optional) goods market problems prompted by questions from class. The first explains why the IS curve has that name while the second studies the (demandside) effects of a cut in the tax rate. The third studies a ba
Some Comments on the Second Midterm
Q1. The difference between the multiplier found in Q1 and that found in class is due to the 9] term in the investment equation not the absence of the .< term. To see this suppose that the investment equation includes bo
Table 1 International disparities in GDP per worker Country USA United Kingdom Argentina France Italy South Africa Mexico Spain Iran Colombia Japan Brazil Turkey Philippines Egypt Korea, Republic of Bangladesh Nigeria Indonesia Thailand Pakistan India Chi
Economics 200 Macroeconomic Theory
Problem Set 1
Due at the beginning of class on September 11, 2007. 1. What type of returns to scale are exhibited by the following production functions where each of the parameters, +, , and ) are positive.1 (a) ] +O ,P;
Economics 200 Macroeconomic Theory
Solutions to Problem Set 1
1. (a) Let ]! +O! ,P! and calculate ]" +O! ,P! +O! ,P! ]! , showing that this production function exhibits constant returns to scale. (b) Let ]! min+O! ,P! and calculate ]" min+O! , P! m
Economics 200 Macroeconomic Theory
Problem Set 2
Due at the beginning of class on September 20, 2007.
1. Suppose that net taxes are given by X >] , where ! > " is the tax rate, an exogenous variable. Find the effects on private saving, public saving and t
Economics 200 Midterm Examination
Tuesday, February 22, 2005 Write your name on your bluebook now. Do not begin writing in your bluebook until told to do so. You have one hour and 10 minutes to complete this exam. Each question carries the number of point
Y=AKa Lb P r o f i t = R e v e nue  C os ts P i = P Y cfw_ KR+L W M PL=F(K , L+ 1 ) F(K , L ) M PL= ( 1 a ) AKa La M PK=aAKa1 La1
Classical Di ch o t o m y Real: Y, r, W/ P (Real Wage) No m i n a l: M , P , W , L s o A>Y mea ns NX<0 m eans S<I Op e n
Chapter 4 Outline
Price Elasticity of Demand
Price Elastiticity of Demand: measure of the responsiveness of the quantity demanded of that
good to changes in its price
 Percentage change in the quantity demanded that results froma 1% change in its price

Chapter 6 Outline
Thinking about Supply: Importance of Opportunity Cost

Sequence of recycling examples shows how the supply curve for a good or service is
rooted in the individuals choice of whether to produce it
Sellers of most goods will offer higher
Chapter 8 Outline
Imperfect Competition
Different Forms of Imperfect Competition
 Price setter: a frim with at least some latitude to set its own price
 Pure monopoly: only supplier of a unique product with no close substitutes
Monopolistic Competition