General Equilibrium models Flashcards
What describes the general equilibrium models?
The relationships between the economic agents
What is the zero profit condition?
Firms maximize profits under full competition
What is the income condition?
Households maxmize utility under a budget restriction
What is market clearence?
Total demand must equal total supply on all markets
What makes it different GE from other models?
The model equations are specified to a specific situation with real
data and that these are used to calculate a numerical solution of the model
How environmental aspects can be model in GE?
Using fixed coefficients, abatement of emissions
How is described de abatement?
As a production
activity, and to derive the optimal level of abatement.
What are the main advanatges of GE?
They descrive the entire economy, elaborate microeconomic foundation, the variables are endogenous
What does endogenous variable means?
Agents respond to price
changes by changing their production or consumption patterns.
What are some main disadvanatges of GE?
They cannnot be solved numerically and they require a lot of data
