GeneralEquilibriumpricetaking1(伦敦经济学院高级.pptxVIP

Microeconomics General Equilibrium: price taking Excess Demand Decentralis-ation and Trade A many-person economy Robinson Crusoes Problem Excess Demand Decentralis-ation and Trade Robinson Crusoes Problem General Equilibrium Why price-taking? A many-person economy Overview... So far weve focused on competitive equilibrium analysis. But why? Why concentrate on equilibrium? Why assume competitive behaviour? Lets start by having another look at the exchange economy. Well redraw the Edgeworth box Some puzzles in competitive equilibrium analysis General equilibrium Robinson Crusoe’s problem Decentrali- sation and Trade A many-person Economy Why price-taking? Excess demand The solution concept Prices and the Core The solution concept An exchange economy Prices and the Core Why price-taking? What would I do out of equilibrium? And what would he do? Lets look at the inner workings... Building an Edgeworth box x1a R1a R2a x2a Oa The situation from Alfs point of view How Alf responds as p1/p2 changes... x1a R1a R2a x2a Oa Alfs offer curve What about Bill? x1b R1b R2b x2b Ob The situation from his point of view ...as an Australian x1b R1b R2b x2b Ob How Bill responds as p1/p2 changes... x1b R1b R2b x2b Ob Bills offer curve The two offer curves 1 x2b Ob x1a x2a Oa x1b R1b R1a R2a R2b Offers are only consistent where curves intersect But, by construction... This is the competitive equilibrium Satisfies materials balance E D Price-taking utility-maximising Bill Price-taking utility-maximising Alf But why competitive behaviour? Why should Alf and Bill behave that way? Where do the prices come from? Given competitive behaviour, the CE is the only consistent allocation subject to h h S pixi £ M i=1 U (x ) max n h h S pixi £ M So where do the prices come from? We need a more general solution concept Then examine how price-taking equilibrium relates to this. Lets develop the approach for