There are two countries, Home (H) and Foreign (F). There are two goods, units of wine (Qw) and cheese (Qc). Suppose there is one factor of production, labour, which is available in amounts L and L
In the last lecture two concepts were introduced: Pareto efficiency and general equilibrium. How do they relate? Theorem: The first welfare theorem states that every general equilibrium involves a Pareto efficient llocation
Endowments and Allocations Consider first the case of a pure exchange economy. (One with no production). Suppose there are two consumers, A and B, in a two good economy. A starts with an endowment of ωA =
Production — Games 1 Monopolistic Competition Monopolistic competition arises when there are a large number of price-setting firms in an industry with free entry. Suppose there are n firms. In the short run, each firm faces an nth of the market demand curve
