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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Adding an energy sector to Nordhaus's RICE model
This is a follow-up question:
Modelling effect of renewable energy investment on GDP (via integrated assessment models)
I'm interested in adding an energy sector to Nordhaus's RICE model. Has there ...
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Is a balanced BOP (without taking the official reserves account into consideration, desirable in the real world?
In general, BOPs(without taking the official reserves account into consideration( aren't balanced.
A BOP surplus is generally a good sign if the correct goods and being exported and a BOP deficit is ...
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A question on short run equilibrium in the simple Keynesian model
In the simple Keynesian model , it's generally assumed that there are no technological changes in the short run. However, as this is a macroeconomic model, changes in one or 2 industries, shouldn't ...
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Production economy general equilibrium
I encountered the following economic model.
Consider the following general equilibrium model with only two households, two consumer goods ($x$ and $y$) and two inputs (capital $k$ and labor $l$). ...
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Wealth Tax and General Equilibrium
Could we create a General Equilibrium model to study the effects of a Weatlh Tax; is such a model fit and adequate? It seems that Partial Equilibrium models are most inadequate to study the effects of ...
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Finding all symmetric mixed strategy equilibria in a finite game
There’s a pure strategy and one mixed strategy with probability distribution (0.5,0.5,0) and (0.5,0.5,0) for each player in this game.
But I was wondering if this example fails the fact that there are ...
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Question on the conditions for the existence of a Walrasian equilibrium
I have a production Economy with two consumers and one producer.
Consumers have a consumption set in $R^2_+$
Y is production possibility set and $$Y= \{y | max (2y_1+ y_2, y_1+2y_2)\le 0\}$$.
...
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Find the set of Pareto efficient allocations
There is an exchange economy with two people and two goods.
Utility functions are
$u_A(x_A, y_A)=\max\{x_A, y_A\}$
$u_B(x_B, y_B)=\max\{x_B, y_B\}$
Endowments are $w_A(1,\alpha)$ and $w_B(1,\alpha)$ ...
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for each Pareto efficient allocation, suggest how we might change the endowments so that the Pareto efficient allocation is a walrasian equilibriuM
I have a two-person exchange economy
Each agent has the following utility $u_i(x_i,y_i)=v(x_i)+y_i$ for agent $i=\{A,B\}$
Assume that $v$ is strictly concave and increasing function that has a ...
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Proving the set of allocations is empty
Consider an economy with odd number of $n\ge 3$ agents. Let allocations be $x\in [0, 1]^n$ such that $\sum_ix_i=1$
Let agent i has the utility function $u_i(x)=x_i$
Define the set $v$ by saying that ...
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A question on the simple Keynesian model
In the simple keynesian model, the equilibrium is usually calculauted by dteremining where the aggreagate supply curve meets the aggregate demand curve curve, with the AS curve , usually taken to be a ...
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Are weak and strong pareto optimality equivalent in terms of efficiency and equity?
Can I claim that the concepts of weak and strong Pareto optimality are equivalent both in terms of efficiency and equity among agents and generate the same level of social welfare?
I know that when ...
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Can budget lines of two agents containing equilibrium allocations be different?
Consider a pure exchange economy that has two goods and two agents (people). Suppose the initial endowments of person $A$ and $B$ are $(e_x^{A}, e_y^{A})$ and $(e_x^{B}, e_y^{B})$ (resp.) such that $...
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Alternate formulas with NonEquivalent Averages to judge an ending quarter of one season (It's my post from StackMath.)
What would be economic aspects which are economically reasonable have you found from my post here ? i.e. Nash equilibrium (based on theory of "about a quarter of its matches end in draws"), ...
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Is there a way to proof why prices non-negative or strictly positive in some cases?
I am studying Microeconomics at a Graduate level with Mas-Colell and I found something in our course slides that I do not know how to prove:
If we allow free disposal in the production set, the ...
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Reason behind Pareto principle
Is Mathew effect or Pareto Principle are the laws of nature like Newton law of gravitation. What are the reason behind Pareto principle?
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Calculating Direct and Indirect Resource Use using Input Output Approach
I have been referring to Perman's book titled, "Natural Resource and Environmental Economics" for economy wide environmental modelling. In Chapter 8, Section 8.2 pg.257-259; it talks about ...
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Why did economic forecasters get inflations predictions so wrong?
I come from more of a statistics and applied math background, but I am interested in issues of social science. I have been trying to understand why economic forecasters or forecast models seems to ...
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Interesting example of general equilibrium effects contradicting RCT results
One of the concerns that one can have regarding the use of RCTs for evaluating policies is that while when done in small scales, the RCTs may show the result in one direction, scaling the policies may ...
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Macroeconomics and microeconomics
Can we say macroeconomics is top down approach and microeconomics is bottom up approach .Is there any relation/connection between macroeconomics and microeconomics.
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what is the optimal allocation for this economy
A two-person two commodity economy has social endowment of x = 1 unit of food and y = 1 unit of wine. Agents preferences are increasing in own consumption but decreasing in wine consumption of the ...
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Learning Resource Question - Computable General Equilibrium Modelling
Several years after graduation, I would like to learn some practical computable general equilibrium (CGE) modelling such as a CGE that can handle distributional outcomes.
Does anyone know of open-...
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Existence of a Walrasian Equilibrium
I was wondering how to tackle part b of this question. I've already completed part a) using the usual method of equating the MRS (kink point for the second utility function) then looking at ...
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When is an allocation in the core of an economy but it's not a Walrasian equilibrium?
So I was given this problem where both agents have Cobb-Douglas utility functions and I'm asked to find an allocation that's in the core but not a Walrasian equilibrium. Isn't the core of an economy ...
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Competitive equilibrium for an economy with a consumer and a producer
A representative agent’s preference over consumption $(c)$ and labour supply $(l)$ is given by the utility function $$ u(c_D, l_S)= c_D^a .(24-l_S)^{1-a}$$
Production of the consumption good $c$ is ...
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Understanding a paragraph in Debreu's Theory of Value
I wish to understand the following paragraph (from section $2.7$ of Debreu's Theory of Value):
Imagine that a certain good circulates as money at location $s$, at date $t$,
and let $k$ be the index ...
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What does it mean when an economist talks about "equilibrium"
In economics, there are many equilibrium concepts, like equilibrium under perfect competition, Monopolist equilibrium, competitive equilibrium, general equilibrium, nash equilibrium, equilibrium price,...
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Changes in TFP and wage rates across firms
Assume that you have two firms, firm A and firm B. Firm A faces the
production function:
$$
Y_{A}=A_{A}F\left(K_{A},L_{A}\right)
$$
and firm B faces:
$$
Y_{B}=A_{B}F\left(K_{B},L_{B}\right)
$$
Factors ...
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Perfect Competition, Zero profit rule and General Equilibrium
I'm reading a book where the definition of an equilibrium for a competitive economy is given as in
Kenneth J. Arrow; Gerard Debreu (1954) Existence of an Equilibrium for a Competitive Economy ...
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How to solve a general equilibrium problem with lexicographic preferences?
I have been unable to find a good example of this type of GE problem in our textbooks, and our professor has indicated that something like this may appear on our exam. So, here is a hypothetical ...
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How do I find the socially optimum and equilibrium value?
I am struggling with the following question. Could someone please explain how to do it?
People are trying to go to the city centre. A bus takes 1 hour and will always take 1 hour,
unaffected by ...
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How would a perfectly competitive industry respond to a macroeconomic demand shock in the long run?
In microeconomics, we are taught that in a perfectly competitive industry, the long-run industry supply curve is horizontal. This is because new firms would enter or exit until the profit is driven to ...
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In a box diagram, why does efficiency locus lie on one side of the diagonal, if both sectors haves constant returns to scale function?
The following is what I understand, so far.
If we measure labour in the $x$-axis and capital in the $y$-axis, the slope of diagonal of the box is the capital-labour ratio $K/L$ in the economy. Let $A$ ...
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Is this really a valid description of AS&AD after lockdown?
I understand that in the short run AS decreased (supply chains) and AD increased (stimulus, post-lockdown behaviour). But what's up with the lines in the long-run?
Also is this even a valid way of ...
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Can a 'general equilibrium' involve externalities?
The textbook definition of 'general equilibrium' requires that 1) each individual's utility depends only on their own consumption bundle 2) each firm's profits depend only on their own production plan....
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Non-existence of general equilibrium with quasi-linear utility
I recently came across an interesting example of why general equilibrium need not exist with quasi-linear utility (in case anyone is interested, I'm posting this at the end). To make the example work, ...
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Say's law of markets: theory and empirics
Good morning everyone, since I've just finished to read the book "A Treatise on Political Economy" by the french economist J.B. Say and since I've read about his famous "law of markets&...
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What should I learn from heterodox economy? [closed]
As a graduate and master student, everything I've learned and I'm learning is from mainstream economy which in some parts seems like propaganda. Most of theories comes from the hypotesis of perfect ...
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Failure of 1st welfare theorem with non-increasing utility function
I want to find an example that utility function is not increasing
but still satisfies that $u(x) \geq u(y)$ for all $x \geq y$
and 1st welfare theorem fails.
I want to prove this on edgeworth box not ...
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Equilibrium in an endowment economy
Consider an endowment economy with 2 agents with the same preferences defined by $\sum\beta^tlog\ c_t$ where
Agent 1 has the following stream of endowments: $(w_0,w_1,w_2,w_3,...) = (2,1,2,1,...)$.
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Is there any macroeconomic model based on Olson's collective action theory?
I've recently learned about Olson's Collective Action Theory and I'm interested in mathematic models of economies that follow the theory's axioms. I tried finding a general equilibrium macro model ...
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First and Second-Best
Why are environmental instruments like Pigovian-taxes or the Coase-Theorem viewed as first-best solutions, while taxes or tradable permits are viewed as second best? How do they differ, and what makes ...
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Does aggregate CRS imply firm-level CRS?
Suppose that a production set $Y \subset \mathbb R^I$ has the following two properties:
Constant returns to scale: $\forall y \in Y, \alpha \geq 0$, we have $\alpha y \in Y$.
Separability: For some $\...
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GE with an intermediate good
intro
I'm looking at a simple model with 1 consumer, 2 goods and 2 firms.
I'm trying to get a price vector [p0, p1] that makes it work.
By makes it work, I mean, ...
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Walrasian Equilibrium in A Simple Assignment (Matching) Model
I am reading Acemoglu 1996 and the Walrasian allocation in section II makes me confused. The setting is following.
The economy lasts for two periods and consists of two types of agents, firms and ...
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Finding the set of pareto efficient allocations with externalities
I have a two-agent exchange economy where utility functions are given by: $u_{1}=x_{12}-x_{21}$ and $u_2=x_{21}x_{22}$. I am looking to find the set of pareto efficient allocations.
Since utility ...
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Effect of change in endowments on prices in Walrasian equilibria
I have a two-good, two-consumer exchange economy. $(\omega_{i1}, \omega_{i2})\in \mathbb{R}_{+}^2$ denote consumer $i$'s endowments of commodities 1 and 2 for $i\in\{1,2\}$. Utility functions are ...
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Proving local non-satiation in arbitrary metric space
I have a pure exchange economy where every consumption set $X_i$ is non-empty and convex and every preference relation $\succeq_{i}$ is strictly convex. I am asked to show that preferences are locally ...
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Aggregation of the closure property of a production set
Consider an economy with finitely many goods $I$ and factors $F$. For each good $i$, let $Y_i \subset \mathbb R^I \times \mathbb R^F_{\geq 0}$ denote a production set for $i$. Assume each $Y_i$ has ...
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Gale's version of the Rubinstein-Wolinsky (1985) model
Likely to be a very stupid doubt.
I am reading Douglas Gale's book "The Strategic Foundations of General Equilibrium", which presents a brief version of "Equilibrium in a Market with ...
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