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Walrasian equilibrium
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RichaS
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Feb 23, 2017; 12:43pm
Walrasian equilibrium
97 posts
The answer to the second part (competitive equilibrium) is the
45° line from top left to bottom right in an edgeworth box with price ratio equal to 1
.
But can anyone explain how?
I got the price ratio=1 but not the equilibrium allocations.
Abhitesh
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Feb 24, 2017; 5:55pm
Re: Walrasian equilibrium
162 posts
Competitive equilibrium(CE) is the consumption bundle and price that
(1) is feasible.
(2) solves consumption optimization problem.
Alternatively, at CE aggregate excess demand for each good is zero.
Any point on the stated line when p=1 satisfies above condition.
Check that p(> or <)1 does not satisfy above condition.
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