Chapter 29 Exchange Partial equilibrium and general equilibrium.

Slides:



Advertisements
Similar presentations
General Equilibrium and Economic Welfare
Advertisements

Chapter Thirty-One Welfare Social Choice u Different economic states will be preferred by different individuals. u How can individual preferences be.
13. Production Varian, Chapter 31.
General Equilibrium (Welfare Economics). General Equilibrium u Partial Equilibrium: Neglects the way in which changes in one market affect other (product/factor)
TOOLS OF NORMATIVE ANALYSIS
Chapter 16. GENERAL EQUILIBRIUM AND MARKET EFFICIENCY McGraw-Hill/IrwinCopyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter.
Chapter Twenty-Nine Exchange. u Two consumers, A and B. u Their endowments of goods 1 and 2 are u E.g. u The total quantities available and units of good.
Introductory lectures on Microeconomics Lecture 1 – Markets and gains from trade Department of Management 28th September 2010 Mara Airoldi.
Chapter Thirty Production. Exchange Economies (revisited) u No production, only endowments, so no description of how resources are converted to consumables.
General Equilibrium Theory
12. General equilibrium: An exchange economy
Microeconomics General equilibrium Institute of Economic Theories - University of Miskolc Mónika Kis-Orloczki Assistant lecturer.
Chapter 7 General Equilibrium and Market Efficiency
Chapter Twenty-Nine Exchange. u Two consumers, A and B. u Their endowments of goods 1 and 2 are u E.g. u The total quantities available and units of good.
1 General Equilibrium APEC 3001 Summer 2006 Readings: Chapter 16.
Assoc. Prof. Y.KuştepeliECN 242 PUBLIC ECONOMICS1 TOOLS OF NORMATIVE ANALYSIS.
Robinson Crusoe model 1 consumer & 1 producer & 2 goods & 1 factor: –two price-taking economic agents –two goods: the labor (or leisure x 1 ) of the consumer.
UNIT II:Firms & Markets Theory of the Firm Profit Maximization Perfect Competition Review 7/15 MIDTERM 7/6.
General Equilibrium and Economic Welfare
CHAPTER 30 EXCHANGE.
1 Exchange Molly W. Dahl Georgetown University Econ 101 – Spring 2009.
General Equilibrium and Market Efficiency
General Equilibrium Theory A General Economy m consumers n producers (n goods) Resources m X n demand equations n supply equations Prices A Pure Exchange.
1 Chapter 10: General Equilibrium So far, we have studied a partial equilibrium analysis, which determines the equilibrium price and quantities in one.
Consumer Behavior & Public Policy Lecture #3 Microeconomics.
Microeconomics 2 John Hey. Lecture 9 Today I am going to start by reviewing the main points from Chapter/Lecture which I regard as the most important.
Chapter Thirty-Two Production. Exchange Economies (revisited)  No production, only endowments, so no description of how resources are converted to consumables.
1 Intermediate Microeconomic Theory Exchange. What can a market do? We’ve seen that markets are interesting in that if one exists, and someone chooses.
Microeconomics Course E John Hey. An overview...of the first two parts of the course......of the most important points.
Total Output, x “Stylized” view of production functions – long run and short run Long-run Production with 2 variable inputs (v 1, v 2 ): v1v1 v2v2 v11v11.
1 Chapters 6 & 19.1 & 19.2: Exchange Efficiency, and Prices.
1 Exchange. 2 Two consumers, A and B. Their endowments of goods 1 and 2 are E.g. The total quantities available and units of good 1 units of good 2. and.
Chapter 18W McGraw-Hill/IrwinCopyright © 2010 The McGraw-Hill Companies, Inc. All rights reserved.
Intermediate Microeconomic Theory
CHAPTER 31 PRODUCTION. The Robinson Crusoe Economy One consumer and one firm; The consumer owns the firm; Preference: over leisure and coconuts; Technology:
Ecological Economics Week 9 Tiago Domingos Assistant Professor Environment and Energy Section Department of Mechanical Engineering Doctoral Program and.
12. General equilibrium Contents assumptions of the model assumptions of the model term „efficiency“ term „efficiency“ production possibility frontier.
Econ 3010: Intermediate Price Theory (Microeconomics) Professor Dickinson Appalachian State University Lecture Notes Outline— Section 3.
EC PUBLIC SECTOR ECONOMICS 1 TOOLS OF NORMATIVE ANALYSIS Prof.Dr. Y.Kuştepeli.
Slide 1Copyright © 2004 McGraw-Hill Ryerson Limited Chapter 16 General Equilibrium and Market Efficiency.
Arrow’s Impossibility Theorem. Question: Is there a public decision making process, voting method, or “Social Welfare Function” (SWF) that will tell us.
Chapter 32 Production. Exchange Economies (revisited) No production, only endowments, so no description of how resources are converted to consumables.
Microeconomics Corso E John Hey. Summary of Chapter 8 The contract curve shows the allocations that are efficient in the sense of Pareto. There always.
1 Production. 2 Exchange Economies (revisited) No production, only endowments, so no description of how resources are converted to consumables. General.
Chapter 33 Welfare 2 Social Choice Different economic states will be preferred by different individuals. How can individual preferences be “aggregated”
Econ 102 SY Lecture 9 General equilibrium and economic efficiency October 2, 2008.
Welfare Economics and the Gains from Trade
Exchange Chapter 31 Niklas Jakobsson Click to add notes.
Chapter 10 General Equilibrium and Economic Welfare.
TOOLS OF NORMATIVE ANALYSIS
Chapter 32 Exchange.
GENERAL EQUILIBRIUM AND WELFARE
Chapter 32 Exchange Key Concept: Pareto optimum and Market Equilibrium
Chapter Twenty-Nine Exchange.
General Equilibrium (cont)
Microeconomics Corso E
General Equilibrium (Social Efficiency)
L13 General Equilibrium.
General Equilibrium (cont)
General Equilibrium (cont)
Chapter 33 Production.
Chapter 6 Exchange Economies
General Equilibrium (Social Efficiency)
General Equilibrium (Social Efficiency)
General Equilibrium (Social Efficiency)
Chapter 34 Welfare.
L12 General Equilibrium.
L12 General Equilibrium.
Chapter 34 Welfare Key Concept: Arrow’s impossibility theorem, social welfare functions Limited support of how market preserves fairness.
L13 General Equilibrium.
Presentation transcript:

Chapter 29 Exchange

Partial equilibrium and general equilibrium

Edgeworth box p497 A pure exchange model of two goods, two consumers with fixed endowments w.

Region of mutual advantages. Pareto set and the contract curve. Bargaining for relative prices. Gross demand x (p), Net or excess demand z (p) = x (p) - w (p).

Person B Person A xA1xA1 wA1wA1 Endowment wA2wA2 xA2xA2 GOOD 2 GOOD 1 xB1xB1 wB1wB1 xB2xB2 wB2wB2 M

Endowment Person B’s indifference curve A Pareto efficient allocation Person A’s indifference curve Contract curve Person A GOOD 1 GOOD 2 Person B

From disequilibrium to the competitive equilibrium. Which good is too cheap? Offer curve approach. The existence problem of equilibrium.

A’s ind, curves B’s ind. curves A’s offer curve B’s offer curve Good 1 is Too cheap Equilibrium price W E

Chapter 30 Production

The Robinson Crusoe economy Production function Indifference curves LaborL*L* C* Coconuts

Production possibilities set F* C* COCNUTS FISH PRODUCTION POSSIBILITIES SET SLOPE=MARGINAL RATE OF TRANSFORMATION (Two outputs case)

Trade leads to Separation of prod. and coms. (P/C), Production specialization(A P), and Wealth improvement( A C). A P C

Heckscher-Ohlin theory on international trade, under many idealization assumptions.

* Costs of exchange. * Price difference between selling and buying. Fig. * GATT and WTO.

Chapter 30 Welfare

The social preference. Two kinds of voting: majority, and rank-order.

The social welfare function. Benthamite: W (u 1, …,u n ) = a 1 u 1 + … + a n u n. Rawlsian: W (u 1, …,u n ) = min {u 1, …, u n }.

Three requirements on a social decision mechanism: 1, It should be complete, reflexive, and transitive; 2, If everyone prefers X to Y, then the society should prefer X to Y; 3, The preferences between X and Y should depend only on how people rank X versus Y, and not on how they rank other alternatives.

Arrow's Impossibility Theorem If a social decision mechanism satisfies properties 1, 2, and 3, then it must be a dictatorship: all social rankings are the rankings of one individual.