Stack Exchange Network

Stack Exchange network consists of 174 Q&A communities including Stack Overflow, the largest, most trusted online community for developers to learn, share their knowledge, and build their careers.

Visit Stack Exchange

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.

0
votes
1answer
26 views

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 ...
0
votes
0answers
45 views

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 ...
8
votes
1answer
61 views

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 ...
1
vote
0answers
13 views

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 ...
1
vote
1answer
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 ...
-1
votes
1answer
58 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 ...
1
vote
1answer
62 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 ...
3
votes
1answer
60 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?
0
votes
0answers
42 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 ...
1
vote
1answer
51 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)?
0
votes
0answers
71 views

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 ...
1
vote
1answer
34 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 ...
1
vote
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 ...
0
votes
0answers
193 views

Is a Walrasian equilibrium necessarily Pareto efficient?

Is it correct to say that in a double auction the Walrasian equilibrium Pareto efficient?
0
votes
0answers
31 views

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 ...
0
votes
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. ...
3
votes
1answer
50 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 ...
0
votes
0answers
20 views

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_{...
1
vote
2answers
53 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 ...
1
vote
0answers
11 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. ...
1
vote
1answer
30 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 ...
0
votes
0answers
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 ...
1
vote
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. ...
0
votes
0answers
21 views

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 ...
0
votes
0answers
9 views

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, ...
1
vote
0answers
52 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 ...
1
vote
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 ...
1
vote
1answer
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 ...
0
votes
0answers
20 views

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 ...
0
votes
0answers
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 ...
1
vote
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 ...
2
votes
0answers
60 views

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 ...
2
votes
1answer
110 views

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 ...
4
votes
0answers
131 views

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 ...
2
votes
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 ...
0
votes
1answer
52 views

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 ...
1
vote
0answers
118 views

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 ...
4
votes
0answers
194 views

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 "...
1
vote
2answers
1k views

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 ...
3
votes
1answer
123 views

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 ...
0
votes
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 ...
4
votes
1answer
58 views

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 ...
2
votes
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 ...
0
votes
2answers
98 views

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 ...
2
votes
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 (...
3
votes
0answers
37 views

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 ...
2
votes
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 ]...
2
votes
0answers
70 views

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?
0
votes
1answer
20 views

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 ...
5
votes
0answers
55 views

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 ...