Chapter 29 Exchange
Chapter 29 Exchange
Partial equilibrium and general equilibrium
Partial equilibrium and general equilibrium
Edgeworth box p497 A pure exchange model of two goods,two consumers with fixed endowments w
Edgeworth box p497 ⚫A pure exchange model of two goods, two consumers with fixed endowments w
Region of mutual advantages. o Pareto set and the contract curve. o Bargaining for relative prices Gross demand x (p), ●Net or excess demand Z(p)=x(p)-w(p)
⚫ Region of mutual advantages. ⚫ Pareto set and the contract curve. ⚫ Bargaining for relative prices. ⚫ Gross demand x (p) , ⚫ Net or excess demand z (p) = x (p) - w (p)
GOOD 2 XBl WBl Person B 43 XB Wa? Endowment Person A WA GOOD 1
Person B Person A xA 1 wA 1 Endowment wA 2 xA 2 GOOD 2 GOOD 1 xB 1 wB 1 xB 2 wB 2 M
Contract G00D2 curve Person B Pareto efficient Person A's indifference llocation curve Person B's indifference curve Endowment Person A GOOD 1
Endowment Person B’s indifference curve A Pareto efficient allocation Person A’s indifference curve Contract curve Person A GOOD 1 GOOD 2 Person B
o From disequilibrium to the competitive equilibrium. Which good is too cheap? oOffer curve approach. The existence problem of equilibrium
⚫From disequilibrium to the competitive equilibrium. Which good is too cheap? ⚫Offer curve approach. ⚫The existence problem of equilibrium
Equilibrium price A's offer curve Good 1 is B's ind.curves Too cheap B's offer curve A's ind,curves
A’s ind, curves B’s ind. curves A’s offer curve B’s offer curve Good 1 is Too cheap Equilibrium price W E
Chapter 30 Production
Chapter 30 Production
The Robinson Crusoe economy Coconuts Indifference curves Production function L' Labor
The Robinson Crusoe economy Production function Indifference curves L Labor * C* Coconuts