Managerial Economics

Chapter 15

General Equilibrium and Welfare Economics

After studying this chapter, you should be able to understand:

• General equilibrium analysis involves a state, where all the markets and the decisionmaking units in the economy are in a simultaneous equilibrium.
• The general equilibrium of production in a two goods economy can be depicted with the help of the Edgeworth Box Diagram.
• Each point on the contract curve of production is an efficient allocation of the inputs and represents a general equilibrium of production.
• Each point on the production possibility frontier is an efficient allocation of the inputs.
• Each point on the contract curve of consumption is an efficient allocation of the goods and represents a general equilibrium of consumption ...