1 Chapter 16 General Equilibrium Theory 16.1 General Equilibrium Analysis: Two Markets 16.2 General Equilibrium Analysis: Many Markets 16.3 General Equilibrium Analysis: Comparative Statics 16.4 The Efficiency of Competitive Markets 16.5 Gains from Free Trade
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1 Chapter 16 General Equilibrium Theory 16.1 General Equilibrium Analysis: Two Markets 16.2 General Equilibrium Analysis: Many Markets 16.3 General Equilibrium.
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1
Chapter 16General Equilibrium Theory
16.1 General Equilibrium Analysis: Two Markets
16.2 General Equilibrium Analysis: Many Markets
16.3 General Equilibrium Analysis: Comparative Statics
16.4 The Efficiency of Competitive Markets
16.5 Gains from Free Trade
2Chapter Sixteen
16.1 Partial vs. General Equilibrium
Definition: General Equilibrium analysis is the study of how equilibrium is determined in all markets simultaneously (e.g. product markets and labor markets).
Definition: Partial Equilibrium analysis is the study of how equilibrium is determined in only a single market (e.g. a single product market).
Definition: General Equilibrium analysis is the study of how equilibrium is determined in all markets simultaneously (e.g. product markets and labor markets).
Definition: Partial Equilibrium analysis is the study of how equilibrium is determined in only a single market (e.g. a single product market).
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16.1 GE: Two Markets
In two RELATED markets, the outcomes in one market are influence by the outcomes in the other market
ie: CD’s and music downloads
ie: Health food and gym memberships
Original equilibrium is calculated similar to a BETRAND MODEL WITH DIFFERENTIATED PRODUCTS:
4Chapter Thirteen
GE: Two Markets
1) Find Reaction Functions (S=D in each market)
2) Use reaction functions to solve for P’s3) Use P’s to solve for Q`s 4) Summarize