GENERALEQUILIBRIUM

As individual economic units and industries seek equilibrium adjustments to what appear to be give facts, their total group actions change the facts that they face.

The concept of general equilibrium stresses the interdepence or all economic units and of all segments of the economy with one another.

GENERAL EQUILIBRIUM THEORY

ANALYTICAL TOOLS

1. From the standpoint of pure theory, it provides the means of viewing the economic system in its entirety - the means of seeing what holds it operates.

2. it permits the determination of the second, third, and higher order effects of an economic disturbance ( this object is really an application of the first one ).

GENERAL EQUILIBRIUM ANALYSIS

GENERAL EQUILIBRIUM ANALYSIS

- Provides the more relevant answer regarding its ultimate effects.

VARIANT OF GENERAL EQUILIBRIUM ANALYSIS

1. In the first one, following Leon Walras most economists find it convenient to discuss general

equilibrium in mathematical terms.2. The second variant is Wassily W. Leontief's

input - output analysis. The input - output approach is an empirical descendant of abstract

Walrasian approach.

THE THEORY OF GENERAL EQUILIBRIUM

-The French economist Leon Walras ( 1834 - 1910 ) was the first to design a model of the General Equilibrium of a purely competitive ecconomy.

-Walras's General Equilibrium model is simple, that is to say, the economic ideas that are buliding are simple.ut building blocks are put together mathematically.

-The Italian economist Vilfredo Pareto ( 1848 - 1923 ) who also contributed to the mathematics of general equilibrium theory.

-The mathematics gives a vision of interdependence of price that is clear, precise in detail, complete and self-checking in its logical consistency.