Microeconomics Corso E John Hey

Note about Chapter 16 We will study this next week. It is important because it shows that the work we have been doing is useful, not only to understand what is happening in the economy, but also to help policy-making. However it requires knowledge of econometrics. As such it will not be examined.

Part 2 Chapter 15 (today) is the last chapter in part 2. Part 1: without production – only exchange. Part 2: production. Chapter 15 – production and exchange. A difficult chapter – the detail is unimportant – only the principal. The technical condition is too difficult. No exam questions.

Chapter 15 We consider both production and exchange. Case 1: a society with linear technology (like case 1 in chapter 14) for which the frontier is piecewise linear. Case 2: a society in which the frontier is smoothly concave. Let’s go to Maple.

Chapter 15 The rate of trasformation (the slope of the ppf of society) is equal to the marginal rates of substitution of the two individuals (the slopes of their indifference curves). (You will recall that the marginal rates of substitution of the two individuals must be equal in every competitive equilibrium.)

Chapter 15 Goodbye!