Questions tagged [general-equilibrium]
In economics, general equilibrium theory attempts to explain the behavior of supply, demand, and prices in a whole economy with several or many interacting markets, by seeking to prove that the interaction of demand and supply will result in an overall (or "general") equilibrium.
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Exercise where lagrangian is needed?
I teach a general equilibrium class in my university and I want to have an exercise that is not too difficult where the Lagrangian multiplier is needed. I was under the impression that with Cobb ...
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Question about Supply and Demand of health supplements, equilibrium price and quantity
Nowadays, It is observed that people are more health conscious taking more regular health supplements. Moreover, more drug companies are involving in the production of health supplements.
a) How ...
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How likely are the Sonnenschein-Mantel-Debreu results?
I have been reading about the SMD results and it's "damning" nature for GET. My understanding of the result is as follows: price changes not only cause a substitution effect but also change the wealth ...
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How to add a third factor of production to a static CGE-Model in gEcon
I am currently using the tool gEcon trying to create static CGE-models. As a starting point I am using a sample model from the gEcon developers. I already implemented small changes and managed that I ...
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38 views
MICROECONOMICS: Optimal quantity produced in a Perfect Competition Market
Suppose the Total Cost function of a firm in Perfect Competition is
given by: $$C(q) = 450 + 15q + 2q^2$$
The market price is $P = 15$ per unit
Determine the optimal quantity produced by ...
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Would a very cheap renewable energy source be harmful economically?
This question is not on whether these devices work or not but so much as if they did work. What if electricity can be made so cheap that everyone could afford it ti the point there was no demand for ...
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1answer
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Walras's Law V.S Say's Law- Is there a difference?
I've been going over the concept of Walras's Law and often references to Say's Law. I've heard and have seen online that they are really the same thing however by looking at the definitions I notice a ...
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Quantity supplied & demanded equation with tax
Here's the simple question I can't get my head around :(
QD= 120-P
QS= 2P-10
Tax= 25 euro per unit
How much does the government receive?
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Do I understand the second welfare theorem correctly?
As far as I understand, the second welfare theorem says that all Pareto-optimal allocations can be reached by market equilibrium on free competitive markets.
Yet it seems that this understanding is ...
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What purpose does general equilibrium serve in practice?
What purpose does general equilibrium serve in practice?
How is it useful for people (since economics is supposed to assist politics, which is supposed to benefit people)?
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Why the market clearing process depends on assumption of perfect and costless information?
Can anyone give me an intuitive explanation why it is often argued that market cannot clear (i.e. supply and demand of something does not match and there is no equilibrium, so the market gets mired in ...
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Luce Choice Axiom, Quantal Response Equilibrium
How is the Quantal response equilibrium model influenced by the Luce choice axiom since Quantal Response equilibrium takes into account the rationality parameter ß and I dont see the mention of ...
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1answer
46 views
Wealth transfer by Social Planner in GE
I am reading the definition of a price equilibrium with transfer in MWG on page 548, 524-5.
Consider two-consumer exchange economy. If social planner wants to transfer wealth, how does she achieve ...
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Is a Walrasian equilibrium necessarily Pareto efficient?
Is it correct to say that in a double auction the Walrasian equilibrium Pareto efficient?
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Clarification on the changes of the long-run equilibrium
Suppose a country A a closed economy and in its long-run equilibrium. This government's company announces that they will not proceed with the pipeline in the current month.
Questions:
a) According ...
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1answer
113 views
The social welfare of a unique general competitive equilibrium in an exchange economy
The first theorem of welfare economics states that "Every Walrasian Equilibrium (WE) is Pareto Efficient (PE)" - Microeconomic Theory Nicholson, Synder 11th ed. p477. But PE is quite a weak condition. ...
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Say's law stated in terms of general equilibrium theory?
Say's law is roughly that "an increase in aggregate supply generates an equal increase in aggregate demand".
Can this law be stated, or derived from, a model of general equilibrium?
EDIT: what if we ...
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What is the effect of technology shock on consumption in a standard RBC model?
I want to isolate the effect of a technology schock on consumption (both future and current) in a standard RBC model without labor.
Given the standard Euler equation
$\ u’(c_t)= \beta u’(c_{t+1})(r_{...
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Microeconomics of GDP
Macroeconomists tend to study GDP in terms of macro variables.
Microeconomists study general equilibrium (among other thinga of course).
Is there theory about the relation between general ...
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In what contexts are stable markets sub-optimal?
My understanding is that market stability is a good thing, because it allows more reliable estimates of profits (revenues minus expenses) and expected return-on-investment related to new investments.
...
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1answer
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In Mankiw's Macreoconomics, how come capital is assumed to be fixed while investment is assumed to be variable?
I'm looking at Greg Mankiw's Macroeconomics (7th edition), at the model presented in chapter 3:
$Y = C + I + G,$
where $Y$ is total output, $C = C(Y-T)$ is consumption, $T$ are net taxes (fixed by ...
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31 views
In perfect compition, how does the marginal revenue = marginal costs equality relates to the intersection of supply and demand curve?
In a perfect competitive market, the price and quantity are determined where supply and demand curve intersect (supply = upwards sloping because of increasing costs of production in short periods of ...
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1answer
294 views
Is the convexity of production sets necessary for the welfare theorems?
I have read that the convexity of production sets (for instance non-increasing returns to scale) is not a necessary assumption for the first welfare theorem but it is for the second welfare theorem. ...
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How to get started on this problem?
Consider a population where 50 people face a low risk of sickness and 50 faces a high risk. Low-risk people have an average of 300 of medical expenditures and are willing to pay up to 500 for health ...
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Through which lense(s) does Micro predict the following market risk?
Real market in the US in the 80s, 90s - Telemarketing.
You had the telemarketers - Sellers. And, the advertisers whose goods were pushed - Buyers.
Market appeared stable. But, in the background, ...
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General Equilibrium allocation holding fixed a consumer's utility
I'm having some issues with solving this general equilibrium exercise.
The way I started off is by assuming that since consumer 2's utility is fixed, he will have a fixed utility function. Then ...
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1answer
46 views
How does demand-supply equilibrium interact with profit maximisation?
My understanding of supply and demand is that at higher prices sellers are more willing to supply and buyers will demand less, and the total transaction volume will be supply or demand, whichever is ...
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230 views
Existence of competitive equilibrium between max utility function and min utility function
u1(x1,y1)=max(x1,y1)
ω1=(0.2,0.2);
u2(x2,y2)=min(x2,y2)
ω2=(0.8,0.8)
The utility functions for two individuals and their endowments are given above for a two person two good economy. My question is ...
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Effect of using new techniques to produce higher level of output with same input
$Q. $ Suppose the problem
Max $a_1x_1+a_2x_2$
s.t $$\begin{align}&b_1x_1+b_2x_2 \le L
\\&c_1x_1+c_2x_2 \le K
\\&x_1,x_2 \ge 0\end{align} $$
is solved using the ...
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584 views
Why is the Marginal Social Cost supply curve more efficient than the Marginal Private Cost supply curve?
In my microeconomics class, we are currently learning about externalities. Below I have a picture from my TA's lecture. The idea is that the point where the demand line intersects the Marginal Social ...
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1answer
353 views
Price discriminating monopolist question
A price discriminating monopolist sells in two markets. Inverse demand in market 1 is given by: $$P_1(Q_1) = 80 - (1/2)Q_1$$ and inverse demand in market 2 is given by: $$P_2(Q_2) = 100 - Q_2$$ The ...
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Money in New Keynesian models
I have been doing some reading on general equilibrium theory and it has made me highly confused regarding the logic behind NK models. If I have understood correctly, NK models are based on Walrasian ...
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1answer
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Stone-Geary preferences and competitive equilibrium
Does anybody know if a competitive equilibrium obtains under Stone-Geary preferences; are there multiple equilibria problems; do such preferences admit an analysis with more than one type of ...
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Optimal Fight Purse and Boxing Strategies
The following is all public information available to all the players in this scenario.
The General Setup
In the aftermath of the infamous race between the tortoise and the hare, the salty hare went ...
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1answer
244 views
Recent economics theories that involve differential topology?
The original development of general equilibrium theories involved differential topology.
I wonder if there are any recently developed theories, in any field of economic theories, that utilize ...
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1answer
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Why do we model that higher government involvement increases output?
I have just read about the "real intertemporal" model of a macroeconomy in Macroeconomics by Stephen Williamson. I am concerned about how it says any increase in government spending, even if it is ...
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General equilibrium papers on universal basic income
Are there any microeconomics or general equilibrium articles on universal basic income?
Papers dealing with general wealth transfer mechanisms where a basic universal income would be a subset of the ...
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Equilibrium Uniqueness in a General Equilibrium Framework
I was wondering if anyone had any insight into the conditions that lead to a unique equilibrium in an exchange economy under a general equilibrium framework. More specifically, I know that the two "...
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2answers
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Will SRAS curve definitely shift if LRAS curve shifts?
From what I know, a shift in LRAS is generally caused by a change in maximum productive capacity of an economy, which affects the full-employment output level. Such change in maximum productive ...
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1answer
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Dynamic Market Equilibrium: motivation for differential equations
I came across this discussion, claiming supply and demand are expressible in terms of its price as $$Q_s=c_1+w_1P+u_1P'+v_1P'',\,Q_d=c_2+w_2P+u_2P'+v_2P''.$$Equating supply to demand for an ...
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1answer
202 views
General equilibrium - exchange economy with time and perishable goods
I am attempting to solve a general equilibrium problem from the textbook Jehle and Reny. However, I am slightly confused if my approach is correct. The question is as follows.
Consider an exchange ...
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1answer
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Looking for discussion on equilibrium vs dynamic models in econometrics
I'm a statistician/machine learning scientist more familiar with molecular bio than economics. Trying to find out if an issue I perceive in bio modeling also occurs in econometric modeling.
A common ...
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1answer
269 views
Question regarding General Equilibrium under non-convexities
I have the following question on my problem set:
It's clear to me, since consumer 2 does not care about good 2, that we should give all the economy's endowment of good 2 to consumer 1. In the other ...
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2answers
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supply demand question beginner
I am learning about shifts in supply and demand. Things that shift supply include things like improvement in production technologies. But why would a firm want to increase their supply if they are ...
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1answer
80 views
Can an overall improvement in technology make the owners of one factor worse off?
In a closed two-factor economy, suppose there is a biased technological improvement that increases the productivity of both factors, but one more than the other. Can this reduce the aggregate returns (...
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What would be the consequences of universal parity of buying power (wage value) and freedom to buy?
I've wondered about this for many, many, years..... maybe there's an answer (or several answers?) after all.
As the global economy is set up, one reason a person in the US and EU can afford a nice ...
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1answer
668 views
General equilibrium regarding on U= max(ax,ay) + min(x,y) [closed]
Please kindly instruct me on solving the following in a general equilibrium framework with standard budget constraint,
$$ u^{1}\left ( x \right )= max\left [ \frac{x_{1}}{10}, \frac{x_{2}}{10}\right ]...
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The second welfare theorem without monotonicity
Are there non monotonic preferences that are strictly convex and continues but the second welfare theorem does not hold for them?
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Question regarding demand schedule and equilibrium consumption [closed]
Please refer to the two images posted at this link: http://imgur.com/a/si3ko
Referring to Page 2, I'm not quite sure what the author is trying to say regarding the two bracketed portions. Considering ...
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References on mathematically rigorous general equilibrium theories
I'm looking for a relatively recent survey on the state of the art for mathematical general equilibrium. I'm especially interested in questions of uniqueness, stability and dynamics. (I'm planing on ...
