复旦大学本科微观经济学General Equilibrium.ppt

General Equilibrium andCore Theorems Key issues 1. general equilibrium 2. Pareto principal 3. efficiency and equity Partial equilibrium analysis an examination of equilibrium and changes in equilibrium in one market in isolation problem: by holding prices and quantities of other goods fixed, we ignore possibility that events in this market affect other markets equilibrium prices and quantities doing so is OK for small markets (hoola hoops) General-equilibrium analysis study of how equilibrium is determined in all markets simultaneously an event in one market may have a spillover effect on other markets may be linked through demand through supply because output in one market is an input in another Partial vs. General Equilibrium study equilibrium in several—but not all—markets simultaneously shock in one market has spillover effect in another market general-equilibrium analysis takes account of spillover, unlike partial-equilibrium analysis partial-equilibrium and general-equilibrium analyses give different answers if spillover effects are large Feedback between competitive markets corn and soybean markets are linked consumers substitute between corn and soybeans producers substitute between corn and soybeans Sequence of events shock in corn market affects soy market resulting shift in the soy market affects corn market diminishing reverberations occur until markets settle at new equilibria whether nearly instantaneously or not depends on reaction speeds of consumers and producers Suppose foreign demand for American corn decreases export of corn falls by 10% at the current price total American demand for corn shifts left Relationship Between the Corn and Soybean Markets Relationship Between the Corn and Soybean Markets Partial equilibrium bias in corn market is small General vs. Partial Equilibrium In the early 1970s, OPEC dramatically reduced its output of oil. Use general equilibrium analysis to determine the effect of the shock on the markets for