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5 votes
Accepted

In GE, is price ever exogenous?

This is an interesting question. There is a tradition of general equilibrium models (even if the phrase 'general equilibrium' needs to be specified) that assumes prices as exogenously given. They are ...
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2 votes
Accepted

How to find the competitive equilibrium?

Here is a lazy tricks-based approach that requires almost no calculations: First, we know that every equilibrium allocation must be Pareto efficient by the first welfare theorem. If $B$ consumes ...
1 vote

Finding the Contract Curve

MRS $\left(=\dfrac{\text{MU}_X}{\text{MU}_Y}\right)$ of individual 2 is coming out to be negative because ICs of individual 2 are upward sloping as one of the two commodities is necessarily a bad ...
  • 5,935
2 votes
Accepted

Efficient allocations with perfect complements

The diagram of the edge worth box is correct and yes indeed the points on two red lines are Pareto efficient but in addition to that the points contained in the area between these two red lines (two ...
1 vote
Accepted

Second welfare theorem: can it be used to show there does not exist any competitive equilibrium? (exchange economies)

In every competitive equilibrium, a consumer's endowment is in their budget set. Since they choose an optimal point in the budget set, every consumer in a competitive equilibrium will receive a bundle ...
1 vote

When is an allocation in the core of an economy but it's not a Walrasian equilibrium?

Consider a pure exchange economy with two consumers - A and B, and two goods - X and Y with $u_A(x_A, y_A) = x_Ay_A$, and $u_B(x_B, y_B) = x_By_B$. Suppose endowments of A and B are $\omega_A = (1,0)$ ...
  • 5,935

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