Exchange课程.pptVIP

Trade in Competitive Markets At the new prices p1 and p2 both markets clear; there is a general equilibrium. Question 1: Are prices p1 and p2 determined independently at equilibrium? Question 2: Does the equilibrium exist? Walras’ Law (瓦尔拉斯法则) Walras’ Law is an identity; i.e. a statement that is true for any positive prices (p1,p2), whether these are equilibrium prices or not. 1834-1910 Walras’ Law Every consumer’s preferences are well-behaved so, for any positive prices (p1,p2), each consumer spends all of his budget. For consumer A:For consumer B: Walras’ Law Summing gives Walras’ Law Rea