Chapter Thirty Exchange 交换
Chapter Thirty Exchange 交换
Contents The Edgeworth(艾奇沃斯)Box Pareto improving trade Pareto Efficient Allocation The core(核心) Trade in a competitive market Wa| ras'Law of genera| equilibrium(一般均 衡) First fundamental theorem of welfare Economics(福利经济学第一定理) Second Fundamental Theorem of welfare Economics(福利经济学第二定理)
Contents The Edgeworth (艾奇沃斯) Box Pareto improving trade Pareto Efficient Allocation The Core (核心) Trade in a competitive market Walras’ Law of general equilibrium (一般均 衡) First Fundamental Theorem of Welfare Economics (福利经济学第一定理) Second Fundamental Theorem of Welfare Economics (福利经济学第二定理)
E Xchange Two consumers, a and B Their endowments of goods 1 and 2 are A RA=(AA andB(BB E.g A (6, 4)and a B (2,2 The total quantities available are @ toB 6+2=8 units of good 1 and ai +a%=4+2=6 units of good 2
Exchange Two consumers, A and B. Their endowments of goods 1 and 2 are E.g. The total quantities available A A A = ( , ) 1 2 B B B = ( , ). and 1 2 A = (6,4) B and = (2,2). 1 1 6 2 8 A B + = + = 2 2 4 2 6 A B + = + = units of good 1 and units of good 2. are
Exchange Edgeworth and bowley devised a diagram, called an Edgeworth box, to show all possible allocations of the available quantities of goods 1 and 2 between the two consumers
Exchange Edgeworth and Bowley devised a diagram, called an Edgeworth box, to show all possible allocations of the available quantities of goods 1 and 2 between the two consumers
Starting an Edgeworth box
Starting an Edgeworth Box
Starting an Edgeworth box Width A+@1 =6+2=8
Starting an Edgeworth Box Width = 1 1 6 2 8 A B + = + =
Starting an Edgeworth box Height 02+m2 4+2 6 Width A+@1 =6+2=8
Starting an Edgeworth Box Width = 1 1 6 2 8 A B + = + = Height = 2 2 4 2 6 A B + = + =
Starting an Edgeworth box Height The dimensions of 02+m2 the box are the 4+2 quantities available 6 of the goods Width A+@1 =6+2=8
Starting an Edgeworth Box Width = 1 1 6 2 8 A B + = + = Height = 2 2 4 2 6 A B + = + = The dimensions of the box are the quantities available of the goods
Feasible allocations What allocations of the 8 units of good 1 and the 6 units of good 2 are feasible? How can all of the feasible allocations be depicted by the Edgeworth box diagram? One feasible allocation is the before trade allocation: ie, the endowment allocation
Feasible Allocations What allocations of the 8 units of good 1 and the 6 units of good 2 are feasible? How can all of the feasible allocations be depicted by the Edgeworth box diagram? One feasible allocation is the beforetrade allocation; i.e. the endowment allocation
The Endowment allocation Height= The endowment allocation is 0)+ a=(6,4) 4+2 and 6 B=(2 2) Width=1+=6+2=8
Width = 1 1 6 2 8 A B + = + = Height = 2 2 4 2 6 A B + = + = The endowment allocation is A = (6,4) B = (2,2). and The Endowment Allocation