General competitive equi

Question 1

What is GCE characterised by (2)

Answer 1

• very consumer maximises utility given prices, and
• markets clear: the total demand for each commodity just equals
  the aggregate endowment.

Question 2

GCE condition for existence

Answer 2

• the aggregate excess demand function
  should be a continuous function
• Small changes in price should result in only small changes in
  aggregate demand (no jumps)

Question 3

first welfare theorem

Answer 3

a competitive equilibrium is Pareto efficient in the absence of market failure

Question 4

second welfare theorem

Answer 4

If preferences are convex, then any PE allocation can be achieved as a GCE!

Question 6

What does a contract curve show ?

Answer 6

Set of all allocations where MRS of A and B are equal