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General Equilibrium Theory of Value$
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Yves Balasko

Print publication date: 2011

Print ISBN-13: 9780691146799

Published to University Press Scholarship Online: October 2017

DOI: 10.23943/princeton/9780691146799.001.0001

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date: 13 December 2017

The Exchange Model

The Exchange Model

Chapter:
(p.37) Chapter 4 The Exchange Model
Source:
General Equilibrium Theory of Value
Author(s):

Yves Balasko

Publisher:
Princeton University Press
DOI:10.23943/princeton/9780691146799.003.0004

The exchange model is the simplest of all general equilibrium models. Studying it will show us the directions to follow when studying more complex models like those that include production or take explicitly into account time and uncertainty. This chapter introduces the exchange model defined by the equilibrium manifold and the natural projection. It presents proof that the equilibrium manifold is indeed a smooth manifold. The smooth manifold structure implies that the natural projection is a smooth map. In terms of comparative statics, this tells us that equilibrium prices can be considered as depending linearly on the fundamentals defining an economy in sufficiently small neighborhoods of regular equilibria.

Keywords:   exchange model, general equilibrium models, equilibrium manifold, natural projection, smooth manifold

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