COMM 220 Study Guide - Final Guide: Edgeworth Box, Pareto Efficiency, Aggregate Demand
7 Apr 2017
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When you aggregate demand, it affects prices and choices this goes back and forth until everyone is heading towards c*, this causes the price ratio to settle down. General equilibrium we"re figuring out the prices and supply, demand, and equilibrium they"re all figured out all at once, prices and consumption. Pareto optimal an allocation is pareto optimal if it"s impossible to make someone better off without making others worse off. An allocation is pareto optimal is there"s no way to: To make one person better off without making at least one person worse off. Gain from trade without someone else losing from trade. Aggre g a t e supply of 100 x"s. Aggre g a t e supply of 80 y"s. This is a pur e exch a n g e econ o m y, simply exch a n g e , nothing being prod u c e d .
