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 ...

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