Overview
General Equilibrium Theory is a fundamental concept in economics that examines how various markets interact and reach a state of balance. It emphasizes the importance of understanding how supply and demand across multiple markets can lead to an overall equilibrium in the economy. This theory is cruc...
Key Terms
Example: When the price of apples stabilizes because the quantity supplied matches the quantity demanded.
Example: If all resources are allocated such that no one can be made better off without harming someone else.
Example: Analyzing tax policies to see how they impact social welfare.
Example: Using an Edgeworth Box to show how two people can trade goods to reach a mutually beneficial outcome.
Example: A function that considers income distribution and overall happiness.
Example: Points along the curve represent efficient allocations of goods.