微观经济之交换111课件

ChapterThirtyExchange交换ChapterThirtyExchange1ContentsTheEdgeworth(艾奇沃斯)BoxParetoimprovingtradeParetoEfficientAllocationTheCore(核心)TradeinacompetitivemarketWalras’Lawofgeneralequilibrium(一般均衡)FirstFundamentalTheoremofWelfareEconomics(福利经济学第一定理)SecondFundamentalTheoremofWelfareEconomics(福利经济学第二定理)ContentsTheEdgeworth(艾奇沃斯)B2ExchangeTwoconsumers,AandB.Theirendowmentsofgoods1and2are

E.g.Thetotalquantitiesavailableandandunitsofgood1unitsofgood2.andareExchangeTwoconsumers,AandB3ExchangeEdgeworthandBowleydevisedadiagram,calledanEdgeworthbox,toshowallpossibleallocationsoftheavailablequantitiesofgoods1and2betweenthetwoconsumers.ExchangeEdgeworthandBowleyd4StartinganEdgeworthBoxStartinganEdgeworthBox5StartinganEdgeworthBoxWidth=StartinganEdgeworthBoxWidth6StartinganEdgeworthBoxWidth=Height=StartinganEdgeworthBoxWidth7StartinganEdgeworthBoxWidth=Height=Thedimensionsof

theboxarethe

quantitiesavailable

ofthegoods.StartinganEdgeworthBoxWidth8FeasibleAllocationsWhatallocationsofthe8unitsofgood1andthe6unitsofgood2arefeasible?HowcanallofthefeasibleallocationsbedepictedbytheEdgeworthboxdiagram?Onefeasibleallocationisthebefore-tradeallocation;i.e.theendowmentallocation.FeasibleAllocationsWhatalloc9Width=Height=Theendowment

allocationisandTheEndowmentAllocationWidth=Height=Theendowment

10Width=Height=TheEndowmentAllocationWidth=Height=TheEndowment11OAOB68TheEndowmentAllocationOAOB68TheEndowmentAllocation12OAOB6846TheEndowmentAllocationOAOB6846TheEndowmentAllocati13OAOB684622TheEndowmentAllocationOAOB684622TheEndowmentAlloca14OAOB684622The

endowment

allocationTheEndowmentAllocationOAOB684622The

endowment

alloca15Moregenerally,…TheEndowmentAllocationMoregenerally,…TheEndowment16TheEndowmentAllocationOAOBThe

endowment

allocationTheEndowmentAllocationOAOBTh17OtherFeasibleAllocations

denotesanallocationtoconsumerA.denotesanallocationtoconsumerB.AnallocationisfeasibleifandonlyifandOtherFeasibleAllocations18FeasibleReallocationsOAOBFeasibleReallocationsOAOB19FeasibleReallocationsOAOBFeasibleReallocationsOAOB20FeasibleReallocationsAllpointsinthebox,includingtheboundary,representfeasibleallocationsofthecombinedendowments.Whichallocationswillbeblockedbyoneorbothconsumers?Whichallocationsmakebothconsumersbetteroff?FeasibleReallocationsAllpoin21AddingPreferencestotheBoxOAForconsumerA.AddingPreferencestotheBoxO22AddingPreferencestotheBoxMorepreferredForconsumerA.OAAddingPreferencestotheBoxM23AddingPreferencestotheBoxForconsumerB.OBAddingPreferencestotheBoxF24AddingPreferencestotheBoxMorepreferredForconsumerB.OBAddingPreferencestotheBoxM25AddingPreferencestotheBoxMorepreferredForconsumerB.OBAddingPreferencestotheBoxM26AddingPreferencestotheBoxOAForconsumerA.AddingPreferencestotheBoxO27AddingPreferencestotheBoxOAOBAddingPreferencestotheBoxO28Edgeworth’sBoxOAOBEdgeworth’sBoxOAOB29Pareto-ImprovementAnallocationoftheendowmentthatimprovesthewelfareofaconsumerwithoutreducingthewelfareofanotherisaPareto-improvingallocation.WherearethePareto-improvingallocations?Pareto-ImprovementAnallocatio30Edgeworth’sBoxOAOBEdgeworth’sBoxOAOB31Pareto-ImprovementsOAOBThesetofPareto-

improvingallocationsPareto-ImprovementsOAOBTheset32Pareto-ImprovementsSinceeachconsumercanrefusetotrade,theonlypossibleoutcomesfromexchangearePareto-improvingallocations.ButwhichparticularPareto-improvingallocationwillbetheoutcomeoftrade?Pareto-ImprovementsSinceeach33Pareto-ImprovementsOAOBThesetofPareto-

improvingreallocationsPareto-ImprovementsOAOBTheset34Pareto-ImprovementsPareto-Improvements35Pareto-ImprovementsPareto-Improvements36Pareto-ImprovementsTrade

improvesboth

A’sandB’swelfares.

ThisisaPareto-improvement

overtheendowmentallocation.Pareto-ImprovementsTrade

impro37Pareto-ImprovementsNewmutualgains-to-traderegion

isthesetofallfurtherPareto-

improving

reallocations.

Trade

improvesboth

A’sandB’swelfares.

ThisisaPareto-improvement

(帕累托改进)overtheendowmentallocation.Pareto-ImprovementsNewmutual38Pareto-ImprovementsFurthertradecannotimprove

bothAandB’s

welfares.Pareto-ImprovementsFurthertra39Pareto-Optimality(帕累托最优)Betterfor

consumerBBetterfor

consumerAPareto-Optimality(帕累托最优)Bette40Pareto-OptimalityAisstrictlybetteroff

butBisstrictlyworse

offBisstrictlybetter

offbutAisstrictly

worseoffPareto-OptimalityAisstrictly41Pareto-OptimalityAisstrictlybetteroff

butBisstrictlyworse

offBisstrictlybetter

offbutAisstrictly

worseoffBothA

andBare

worse

offBothAand

Bareworse

offPareto-OptimalityAisstrictly42Pareto-OptimalityTheallocationis

Pareto-optimalsincethe

onlywayoneconsumer’swelfarecanbeincreasedisto

decreasethewelfareoftheother

consumer.Pareto-OptimalityTheallocatio43Pareto-OptimalityTheallocationis

Pareto-optimalsincethe

onlywayoneconsumer’swelfarecanbeincreasedisto

decreasethewelfareoftheother

consumer.TheMarginalRatesofSubstitutionAreEqual.Pareto-OptimalityTheallocatio44Pareto-OptimalityWhereareallofthePareto-optimalallocationsoftheendowment?Pareto-OptimalityWhereareall45Pareto-OptimalityOAOBPareto-OptimalityOAOB46Pareto-OptimalityOAOBAlltheallocationsmarkedby

aarePareto-optimal.Pareto-OptimalityOAOBAllthea47Pareto-OptimalityThecontractcurve(契约线)isthesetofallPareto-optimalallocations.Pareto-OptimalityThecontract48Pareto-OptimalityOAOBAlltheallocationsmarkedby

aarePareto-optimal.ThecontractcurvePareto-OptimalityOAOBAllthea49Pareto-OptimalityButtowhichofthemanyallocationsonthecontractcurvewillconsumerstrade?Thatdependsuponhowtradeisconducted.Inperfectlycompetitivemarkets?Byone-on-onebargaining?Pareto-OptimalityButtowhich50TheCore(核心)OAOBThesetofPareto-

improvingreallocationsTheCore(核心)OAOBThesetofPa51TheCoreOAOBTheCoreOAOB52TheCoreOAOBPareto-optimaltradesblocked

byBPareto-optimaltradesblocked

byATheCoreOAOBPareto-optimaltra53TheCoreOAOBPareto-optimaltradesnotblocked

byAorBarethecore.TheCoreOAOBPareto-optimaltra54TheCoreThecoreisthesetofallPareto-optimalallocationsthatarewelfare-improvingforbothconsumersrelativetotheirownendowments.Rationaltradeshouldachieveacoreallocation.TheCoreThecoreisthesetof55TheCoreButwhichcoreallocation?Again,thatdependsuponthemannerinwhichtradeisconducted.TheCoreButwhichcoreallocat56TradeinCompetitiveMarketsConsidertradeinperfectlycompetitivemarkets.Eachconsumerisaprice-takertryingtomaximizeherownutilitygivenp1,p2andherownendowment.Thatis,...TradeinCompetitiveMarketsCo57TradeinCompetitiveMarketsOAForconsumerA.TradeinCompetitiveMarketsOA58TradeinCompetitiveMarketsSogivenp1andp2,consumerA’snetdemandsforcommodities1and2areandTradeinCompetitiveMarketsSo59TradeinCompetitiveMarketsAnd,similarly,forconsumerB…TradeinCompetitiveMarketsAn60TradeinCompetitiveMarketsForconsumerB.OBTradeinCompetitiveMarketsFo61TradeinCompetitiveMarketsSogivenp1andp2,consumerB’snetdemandsforcommodities1and2areandTradeinCompetitiveMarketsSo62TradeinCompetitiveMarketsAgeneralequilibriumoccurswhenpricesp1andp2causeboththemarketsforcommodities1and2toclear;i.e.andTradeinCompetitiveMarketsA63TradeinCompetitiveMarketsOAOBTradeinCompetitiveMarketsOA64TradeinCompetitiveMarketsOAOBCanthisPOallocationbeachieved?TradeinCompetitiveMarketsOA65TradeinCompetitiveMarketsOAOBBudgetconstraintforconsumerATradeinCompetitiveMarketsOA66TradeinCompetitiveMarketsOAOBBudgetconstraintforconsumerATradeinCompetitiveMarketsOA67TradeinCompetitiveMarketsOAOBBudgetconstraintforconsumerBTradeinCompetitiveMarketsOA68TradeinCompetitiveMarketsOAOBBudgetconstraintforconsumerBTradeinCompetitiveMarketsOA69TradeinCompetitiveMarketsOAOBButTradeinCompetitiveMarketsOA70TradeinCompetitiveMarketsOAOBandTradeinCompetitiveMarketsOA71TradeinCompetitiveMarketsSoatthegivenpricesp1andp2thereisanexcesssupplyofcommodity1excessdemandforcommodity2.Neithermarketclearssothepricesp1andp2donotcauseageneralequilibrium.TradeinCompetitiveMarketsSo72TradeinCompetitiveMarketsOAOBSothisPOallocationcannotbeachievedbycompetitivetrading.TradeinCompetitiveMarketsOA73TradeinCompetitiveMarketsOAOBWhichPOallocationscanbe

achievedbycompetitivetrading?TradeinCompetitiveMarketsOA74TradeinCompetitiveMarketsSincethereisanexcessdemandforcommodity2,p2willrise.Sincethereisanexcesssupplyofcommodity1,p1willfall.Theslopeofthebudgetconstraintsis-p1/p2sothebudgetconstraintswillpivotabouttheendowmentpointandbecomelesssteep.TradeinCompetitiveMarketsSi75TradeinCompetitiveMarketsOAOBWhichPOallocationscanbe

achievedbycompetitivetrading?TradeinCompetitiveMarketsOA76TradeinCompetitiveMarketsOAOBWhichPOallocationscanbe

achievedbycompetitivetrading?TradeinCompetitiveMarketsOA77TradeinCompetitiveMarketsOAOBWhichPOallocationscanbe

achievedbycompetitivetrading?TradeinCompetitiveMarketsOA78TradeinCompetitiveMarketsOAOBBudgetconstraintforconsumerATradeinCompetitiveMarketsOA79TradeinCompetitiveMarketsOAOBBudgetconstraintforconsumerATradeinCompetitiveMarketsOA80TradeinCompetitiveMarketsOAOBBudgetconstraintforconsumerBTradeinCompetitiveMarketsOA81TradeinCompetitiveMarketsOAOBBudgetconstraintforconsumerBTradeinCompetitiveMarketsOA82TradeinCompetitiveMarketsOAOBSoTradeinCompetitiveMarketsOA83TradeinCompetitiveMarketsOAOBandTradeinCompetitiveMarketsOA84TradeinCompetitiveMarketsAtthenewpricesp1andp2bothmarketsclear;thereisageneralequilibrium.Question1:Arepricesp1andp2determinedindependentlyatequilibrium?Question2:Doestheequilibriumexist?TradeinCompetitiveMarketsAt85Walras’Law(瓦尔拉斯法则)Walras’Lawisanidentity;i.e.astatementthatistrueforanypositiveprices(p1,p2),whethertheseareequilibriumpricesornot.Walras’Law(瓦尔拉斯法则)Walras’La86Walras’LawEveryconsumer’spreferencesarewell-behavedso,foranypositiveprices(p1,p2),eachconsumerspendsallofhisbudget.ForconsumerA:

ForconsumerB:Walras’LawEveryconsumer’spr87Walras’LawSumminggivesWalras’LawSumminggives88Walras’LawRearranged,Thatis,...Walras’LawRearranged,Thatis,89Walras’LawThissaysthatthesummedmarket

valueofexcessdemandsiszeroforanypositivepricesp1andp2

--

thisisWalras’Law.Walras’LawThissaysthatthe90ImplicationsofWalras’LawSupposethemarketforcommodityAisinequilibrium;thatis,ThenimpliesImplicationsofWalras’LawSup91SooneimplicationofWalras’Lawforatwo-commodityexchangeeconomyisthatifonemarketisinequilibriumthentheothermarketmustalsobeinequilibrium.Ingeneral,iftherearekmarkets,thenonlyk-1pricesaredeterminedatequilibrium.I.e.,thegeneralequilibriumdeterminesonlyrelativeprices.ImplicationsofWalras’LawSooneimplicationofWalras’92ImplicationsofWalras’LawWhatif,forsomepositivepricesp1andp2,thereisanexcessquantitysuppliedofcommodity1?Thatis,ThenimpliesImplicationsofWalras’LawWha93ImplicationsofWalras’LawSoasecondimplicationofWalras’Lawforatwo-commodityexchangeeconomyisthatanexcesssupplyinonemarketimpliesanexcessdemandintheothermarket.ImplicationsofWalras’LawSo94ExistenceofEquilibriumRequirethattheaggregateexcessdemandfunctionsbeacontinuousfunction,whichinturnrequirethatEachindividual’sdemandfunctionbecontinuous,orEachconsumerissmallrelativetothemarket.ExistenceofEquilibriumRequir95TradeinCompetitiveMarketsTradingincompetitivemarketsachievesaparticularPareto-optimalallocationoftheendowments.ThisisanexampleoftheFirstFundamentalTheoremofWelfareEconomics.TradeinCompetitiveMarketsTr96FirstFundamentalTheoremofWelfareEconomicsGiventhatconsumers’preferencesarewell-behaved,tradinginperfectlycompetitivemarketsimplementsaPareto-optimalallocationoftheeconomy’sendowment.FirstFundamentalTheoremofW97TheEquilibriumwithMonopolySeeFig.30.5intextbook.TheEquilibriumwithMonopolyS98TheEquilibriumwithMonopolyFigure30.6inbook.TheEquilibriumwithMonopolyF99ImplicitAssumptionsNoconsumptionexternality(外部效应)AgentsbehavecompetitivelyEquilibriumexistsImplicitAssumptionsNoconsump100MarketSocialism:TheDebateLangevs.HayekSocialismwitheconomicplanningState-ownershipGovernmentchoosespricestoclearmarketsAdvantageofcompetitivemarketsInformationMarketSocialism:TheDebateLa101SecondFundamentalTheoremofWelfareEconomicsTheFirstTheoremisfollowedbyasecondthatstatesthatanyPareto-optimalallocation(i.e.anypointonthecontractcurve)canbeachievedbytradingincompetitivemarketsprovidedthatendowmentsarefirstappropriatelyrearrangedamongsttheconsumers.SecondFundamentalTheoremof102Giventhatconsumers’preferencesarewell-behaved,foranyPareto-optimalallocationtherearepricesandanallocationofthetotalendowmentthatmakesthePareto-optimalallocationimplementablebytradingincompetitivemarkets.SecondFundamentalTheoremofWelfareEconomicsGiventhatconsumers’preferen103SecondFundamentalTheoremOAOBThecontractcurveSecondFundamentalTheoremOAOB104SecondFundamentalTheoremOAOBSecondFundamentalTheoremOAOB105SecondFundamentalTheoremOAOBImplementedbycompetitivetradingfromtheendowmentw.SecondFundamentalTheoremOAOB106SecondFundamentalTheoremOAOBCanthisallocationbeimplemented

bycompetitivetradingfromw?SecondFundamentalTheoremOAOB107SecondFundamentalTheoremOAOBCanthisallocationbeimplemented

bycompetitivetradingfromw?No.SecondFundamentalTheoremOAOB108SecondFundamentalTheoremOAOBButthisallocationisimplemented

bycompetitivetradingfromq.SecondFundamentalTheoremOAOB109TheAssumptionaboutConvexityFigure30.8inbook.TheAssumptionaboutConvexity110Implicationsofthe2ndTheoremMarketequilibriumisdistributionallyneutral.Redistributioncanbecarriedoutforendowments.Themarketplaysonlytheallocationrole.Implicationsofthe2ndTheore111ChapterThirtyExchange交换ChapterThirtyExchange112ContentsTheEdgeworth(艾奇沃斯)BoxParetoimprovingtradeParetoEfficientAllocationTheCore(核心)TradeinacompetitivemarketWalras’Lawofgeneralequilibrium(一般均衡)FirstFundamentalTheoremofWelfareEconomics(福利经济学第一定理)SecondFundamentalTheoremofWelfareEconomics(福利经济学第二定理)ContentsTheEdgeworth(艾奇沃斯)B113ExchangeTwoconsumers,AandB.Theirendowmentsofgoods1and2are

E.g.Thetotalquantitiesavailableandandunitsofgood1unitsofgood2.andareExchangeTwoconsumers,AandB114ExchangeEdgeworthandBowleydevisedadiagram,calledanEdgeworthbox,toshowallpossibleallocationsoftheavailablequantitiesofgoods1and2betweenthetwoconsumers.ExchangeEdgeworthandBowleyd115StartinganEdgeworthBoxStartinganEdgeworthBox116StartinganEdgeworthBoxWidth=StartinganEdgeworthBoxWidth117StartinganEdgeworthBoxWidth=Height=StartinganEdgeworthBoxWidth118StartinganEdgeworthBoxWidth=Height=Thedimensionsof

theboxarethe

quantitiesavailable

ofthegoods.StartinganEdgeworthBoxWidth119FeasibleAllocationsWhatallocationsofthe8unitsofgood1andthe6unitsofgood2arefeasible?HowcanallofthefeasibleallocationsbedepictedbytheEdgeworthboxdiagram?Onefeasibleallocationisthebefore-tradeallocation;i.e.theendowmentallocation.FeasibleAllocationsWhatalloc120Width=Height=Theendowment

allocationisandTheEndowmentAllocationWidth=Height=Theendowment

121Width=Height=TheEndowmentAllocationWidth=Height=TheEndowment122OAOB68TheEndowmentAllocationOAOB68TheEndowmentAllocation123OAOB6846TheEndowmentAllocationOAOB6846TheEndowmentAllocati124OAOB684622TheEndowmentAllocationOAOB684622TheEndowmentAlloca125OAOB684622The

endowment

allocationTheEndowmentAllocationOAOB684622The

endowment

alloca126Moregenerally,…TheEndowmentAllocationMoregenerally,…TheEndowment127TheEndowmentAllocationOAOBThe

endowment

allocationTheEndowmentAllocationOAOBTh128OtherFeasibleAllocations

denotesanallocationtoconsumerA.denotesanallocationtoconsumerB.AnallocationisfeasibleifandonlyifandOtherFeasibleAllocations129FeasibleReallocationsOAOBFeasibleReallocationsOAOB130FeasibleReallocationsOAOBFeasibleReallocationsOAOB131FeasibleReallocationsAllpointsinthebox,includingtheboundary,representfeasibleallocationsofthecombinedendowments.Whichallocationswillbeblockedbyoneorbothconsumers?Whichallocationsmakebothconsumersbetteroff?FeasibleReallocationsAllpoin132AddingPreferencestotheBoxOAForconsumerA.AddingPreferencestotheBoxO133AddingPreferencestotheBoxMorepreferredForconsumerA.OAAddingPreferencestotheBoxM134AddingPreferencestotheBoxForconsumerB.OBAddingPreferencestotheBoxF135AddingPreferencestotheBoxMorepreferredForconsumerB.OBAddingPreferencestotheBoxM136AddingPreferencestotheBoxMorepreferredForconsumerB.OBAddingPreferencestotheBoxM137AddingPreferencestotheBoxOAForconsumerA.AddingPreferencestotheBoxO138AddingPreferencestotheBoxOAOBAddingPreferencestotheBoxO139Edgeworth’sBoxOAOBEdgeworth’sBoxOAOB140Pareto-ImprovementAnallocationoftheendowmentthatimprovesthewelfareofaconsumerwithoutreducingthewelfareofanotherisaPareto-improvingallocation.WherearethePareto-improvingallocations?Pareto-ImprovementAnallocatio141Edgeworth’sBoxOAOBEdgeworth’sBoxOAOB142Pareto-ImprovementsOAOBThesetofPareto-

improvingallocationsPareto-ImprovementsOAOBTheset143Pareto-ImprovementsSinceeachconsumercanrefusetotrade,theonlypossibleoutcomesfromexchangearePareto-improvingallocations.ButwhichparticularPareto-improvingallocationwillbetheoutcomeoftrade?Pareto-ImprovementsSinceeach144Pareto-ImprovementsOAOBThesetofPareto-

improvingreallocationsPareto-ImprovementsOAOBTheset145Pareto-ImprovementsPareto-Improvements146Pareto-ImprovementsPareto-Improvements147Pareto-ImprovementsTrade

improvesboth

A’sandB’swelfares.

ThisisaPareto-improvement

overtheendowmentallocation.Pareto-ImprovementsTrade

impro148Pareto-ImprovementsNewmutualgains-to-traderegion

isthesetofallfurtherPareto-

improving

reallocations.

Trade

improvesboth

A’sandB’swelfares.

ThisisaPareto-improvement

(帕累托改进)overtheendowmentallocation.Pareto-ImprovementsNewmutual149Pareto-ImprovementsFurthertradecannotimprove

bothAandB’s

welfares.Pareto-ImprovementsFurthertra150Pareto-Optimality(帕累托最优)Betterfor

consumerBBetterfor

consumerAPareto-Optimality(帕累托最优)Bette151Pareto-OptimalityAisstrictlybetteroff

butBisstrictlyworse

offBisstrictlybetter

offbutAisstrictly

worseoffPareto-OptimalityAisstrictly152Pareto-OptimalityAisstrictlybetteroff

butBisstrictlyworse

offBisstrictlybetter

offbutAisstrictly

worseoffBothA

andBare

worse

offBothAand

Bareworse

offPareto-OptimalityAisstrictly153Pareto-OptimalityTheallocationis

Pareto-optimalsincethe

onlywayoneconsumer’swelfarecanbeincreasedisto

decreasethewelfareoftheother

consumer.Pareto-OptimalityTheallocatio154Pareto-OptimalityTheallocationis

Pareto-optimalsincethe

onlywayoneconsumer’swelfarecanbeincreasedisto

decreasethewelfareoftheother

consumer.TheMarginalRatesofSubstitutionAreEqual.Pareto-OptimalityTheallocatio155Pareto-OptimalityWhereareallofthePareto-optimalallocationsoftheendowment?Pareto-OptimalityWhereareall156Pareto-OptimalityOAOBPareto-OptimalityOAOB157Pareto-OptimalityOAOBAlltheallocationsmarkedby

aarePareto-optimal.Pareto-OptimalityOAOBAllthea158Pareto-OptimalityThecontractcurve(契约线)isthesetofallPareto-optimalallocations.Pareto-OptimalityThecontract159Pareto-OptimalityOAOBAlltheallocationsmarkedby

aarePareto-optimal.ThecontractcurvePareto-OptimalityOAOBAllthea160Pareto-OptimalityButtowhichofthemanyallocationsonthecontractcurvewillconsumerstrade?Thatdependsuponhowtradeisconducted.Inperfectlycompetitivemarkets?Byone-on-onebargaining?Pareto-OptimalityButtowhich161TheCore(核心)OAOBThesetofPareto-

improvingreallocationsTheCore(核心)OAOBThesetofPa162TheCoreOAOBTheCoreOAOB163TheCoreOAOBPareto-optimaltradesblocked

byBPareto-optimaltradesblocked

byATheCoreOAOBPareto-optimaltra164TheCoreOAOBPareto-optimaltradesnotblocked

byAorBarethecore.TheCoreOAOBPareto-optimaltra165TheCoreThecoreisthesetofallPareto-optimalallocationsthatarewelfare-improvingforbothconsumersrelativetotheirownendowments.Rationaltradeshouldachieveacoreallocation.TheCoreThecoreisthesetof166TheCoreButwhichcoreallocation?Again,thatdependsuponthemannerinwhichtradeisconducted.TheCoreButwhichcoreallocat167TradeinCompetitiveMarketsConsidertradeinperfectlycompetitivemarkets.Eachconsumerisaprice-takertryingtomaximizeherownutilitygivenp1,p2andherownendowment.Thatis,...TradeinCompetitiveMarketsCo168TradeinCompetitiveMarketsOAForconsumerA.TradeinCompetitiveMarketsOA169TradeinCompetitiveMarketsSogivenp1andp2,consumerA’snetdemandsforcommodities1and2areandTradeinCompetitiveMarketsSo170TradeinCompetitiveMarketsAnd,similarly,forconsumerB…TradeinCompetitiveMarketsAn171TradeinCompetitiveMarketsForconsumerB.OBTradeinCompetitiveMarketsFo172TradeinCompetitiveMarketsSogivenp1andp2,consumerB’snetdemandsforcommodities1and2areandTradeinCompetitiveMarketsSo173TradeinCompetitiveMarketsAgeneralequilibriumoccurswhenpricesp1andp2causeboththemarketsforcommodities1and2toclear;i.e.andTradeinCompetitiveMarketsA174TradeinCompetitiveMarketsOAOBTradeinCompetitiveMarketsOA175TradeinCompetitiveMarketsOAOBCanthisPOallocationbeachieved?TradeinCompetitiveMarketsOA176TradeinCompetitiveMarketsOAOBBudgetconstraintforconsumerATradeinCompetitiveMarketsOA177TradeinCompetitiveMarketsOAOBBudgetconstraintforconsumerATradeinCompetitiveMarketsOA178TradeinCompetitiveMarketsOAOBBudgetconstraintforconsumerBTradeinCompetitiveMarketsOA179TradeinCompetitiveMarketsOAOBBudgetconstraintforconsumerBTradeinCompetitiveMarketsOA180TradeinCompetitiveMarketsOAOBButTradeinCompetitiveMarketsOA181TradeinCompetitiveMarketsOAOBandTradeinCompetitiveMarketsOA182TradeinCompetitiveMarketsSoatthegivenpricesp1andp2thereisanexcesssupplyofcommodity1excessdemandforcommodity2.Neithermarketclearssothepricesp1andp2donotcauseageneralequilibrium.TradeinCompetitiveMarketsSo183TradeinCompetitiveMarketsOAOBSothisPOallocationcannotbeachievedbycompetitivetrading.TradeinCompetitiveMarketsOA184TradeinCompetitiveMarketsOAOBWhichPOallocationscanbe

achievedbycompetitivetrading?TradeinCompetitiveMarketsOA185TradeinCompetitiveMarketsSincethereisanexcessdemandforcommodity2,p2willrise.Sincethereisanexcesssupplyofcommodity1,p1willfall.Theslopeofthebudgetconstraintsis-p1/p2sothebudgetconstraintswillpivotabouttheendowmentpointandbecomelesssteep.TradeinCompetitiveMarketsSi186TradeinCompetitiveMarketsOAOBWhichPOallocationscanbe

achievedbycompetitivetrading?TradeinCompetitiveMarketsOA187TradeinCompetitiveMarketsOAOBWhichPOallocationscanbe

achievedbycompetitivetrading?TradeinCompetitiveMarketsOA188TradeinCompetitiveMarketsOAOBWhichPOallocationscanbe

achievedbycompetitivetrading?TradeinCompetitiveMarketsOA189TradeinCompetitiveMarketsOAOBBudgetconstraintforconsumerATradeinCompetitiveMarketsOA190TradeinCompetitiveMarketsOAOBBudgetconstraintforconsumerATradeinCompetitiveMarketsOA191TradeinCompetitiveMarketsOAOBBudgetconstraintforconsumerBTradeinCompetitiveMarketsOA192TradeinCompetitiveMarketsOAOBBudgetconstraintforconsumerBTradeinCompetitiveMarketsOA193TradeinCompetitiveMarketsOAOBSoTradeinCompetitiveMarketsOA194TradeinCompetitiveMarketsOAOBandTradeinCompetitiveMarketsOA195TradeinCompetitiveMarketsAtthenewpricesp1andp2bothmarketsclear;thereisageneralequilibrium.Question1:Arepricesp1andp2determinedindependentlya