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.

128 questions
Filter by
Sorted by
Tagged with
20 views

31 views

How to calculate the spending multiplier from a given set of equations?

So i have this question: I go along and get Then i need to calculate the effect on the optimal output is G increases by 80: And on the answer sheet it states that the spending multiplier is: From ...
52 views

Conditions for Radner Equilibrium

This is definition of Radner Equilibrium from Microeconomic Theory (Mas-Collel, Whinston and Green - Third Edition). I'm confused about two conditions: $\sum_k q_k \cdot z_{ki} \le 0$ (in yellow) ...
33 views

Why do non-binding price ceilings have no effect?

My question seems trivial but I have a particular issue I don't understand. If there's a price ceiling above the price equilibrium, the customers can still use the ceiling as leverage when negotiating,...
31 views

Given a Walrasian equilibrium, compute all intitial endowments that lead to given Walrasian equilibrium

If you would be so kind to take a look at the following problem:* Consider an economy with two agents Stan ($S$) and Laurel ($L$) and two goods: Cans of coke ($C$) and Pretzels ($P$). The total ...
98 views

Why incomes should decline in equilibrium state

According to Keynes, the prosperity of a population is measured by the aggregated income of each individual. Spending this income keeps the economy away from a depression. If there is too much ...
75 views

SMD and Lucas critique

One of the consequences of Lucas' critique is that models must be microfounded. On the other side, Sonnenschein-Mantel-Debreu (SMD) theorem claims that microfoundation doesn't have any repercussion on ...
31 views

find the equilibrium level of Y [closed]

Assume that the LM curve for a small open economy with a floating exchange rate is given by Y = 200r – 200 + 2(M/P), while the IS curve is Y = 400 + 3G – 2T + 3NX – 200r. The function for NX is NX = ...
34 views

64 views

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 ...
486 views

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 ...
369 views

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?
55 views

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 ...
103 views

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)?
53 views

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 ...
90 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 ...
169 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. ...
100 views

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 ...
58 views

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 ...
14 views

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. ...
48 views

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 ...
753 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. ...
72 views

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 ...