Walrasian equilibrium model. History of Economic Doctrines: Theories of General Economic Equilibrium and Development. welfare theory. L. Walras. Creation of a model of general economic equilibrium. List of sources used
11. General economic equilibrium model l. Walras
Walras made an attempt to create a closed mathematical model general economic equilibrium based on the principle of subjective utility and the premise that all economic actors of production are divided into two groups: owners of productive services (land, labor and capital) and entrepreneurs. Households are understood as owners of production factors (labor, capital, land) under enterprises - buyers of production factors and at the same time producers of goods and services. As we can see, according to Walras, the owners of productive services are both sellers of these services and buyers of consumer goods, while entrepreneurs are buyers of productive services and sellers of consumer products. Thus, production and consumption are connected through two interacting markets: markets for productive services (or factors of production) and consumer products.
The supply of productive services and the demand for products are linked as follows: the supply of productive services is considered as a function of market prices for these services, and the demand for products is considered as a function of the prices of productive services (since they determine the income of the owners of production factors) and the prices of these products.
The Walrasian model, although logically complete, is too abstract in nature, since it excludes many important elements real economic life.
In addition to the lack of accumulation, oversimplifications include:
Static model (it is assumed that the stock and range of products are unchanged, as well as the immutability of production methods and consumer preferences),
The assumption of the existence of perfect competition and ideal awareness of the subjects of production.
Ticket number 12 (Interindustry balance)
V. Leontiev's input/output model and its importance in economic planning.
The MOB model is used for macroeconomic analysis, as it covers the entire process of reproduction, reflects the cost and physical form of the gross national product, it presents all the main indicators of macroeconomics.
V. Leontiev's MOB model is distinguished by a twofold consideration of individual industries - as buyers of material goods and services offered by other industries, and as sellers of material goods and services created by them themselves. This characteristic feature of the IEP model allows us to define it as an input-output model.
So, in the national economy, intersectoral flows of means of production are formed, which are an intermediate product. This is reflected in the I quadrant, in the II quadrant the sum of products used for final consumption (final social product) is presented. The totality of intermediate and final products is equal to the sum of all products of enterprises in the national economy (gross national product). The distribution of income by industry is presented in the III quadrant of the IEP. In the IV quadrant, income redistribution, income redistribution flows can be reflected.
Rice. 1. Scheme of input-output balance
V. Leontiev's model can be represented by the equation
X = AX + Y, where
X - the volume of production of any industry;
Y is the final product of this industry;
A - matrix of technological coefficients a ij , i.e. the volume of the i-th industry to create a unit of output of the j-th industry.
With the use of input-output tables, the analytical capabilities of the economic services of the state increase significantly, since the tables make it possible to trace how the growth in the production of any industry causes an adequate growth in other industries, investment and tax policy options, foreign trade, military spending, etc. P.
Emphasizing the importance of the input-output balance model for economic management, at the same time, it should be noted that this model does not fully reflect the processes of interconnection in the national economy. Another disadvantage of the IEP model is that it demonstrates a formula for economic development based on already established technological coefficients. This approach is acceptable for extensive development, but is not very acceptable for intensive development.
At the same time, it should be noted that the input-output model itself is fundamental in the study of the sectoral structure of national production.
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A mathematical description of the theory of general competitive equilibrium using a system of equations was first made by the Swiss economist L. Walras (1834-1910).
Walras model assumes pure (perfect) competition, when none of the producers (sellers) and consumers (buyers) is able to directly influence market prices.
In a competitive market economy, prices for goods and resources and their sales volumes are determined simultaneously. Even assuming that the supply of factors of production is a given value, their market prices cannot be determined until the firms have established the quantity of output. But manufacturers cannot make this decision without knowing the market prices for their products. However, the prices of goods, in turn, cannot be determined until households receive income from the sale of factors of production at certain prices, since the demand for goods depends on the income of consumers.
Thus, the mathematical definition of partial equilibrium in individual markets does not mean general equilibrium in the entire economy, consisting of many micromarkets. If, for example, each equation describes a partial equilibrium in a particular market, this does not mean that the entire system of equations can necessarily be solved. It is likely that none of the values of the variables in the equations of the system can simultaneously satisfy all the equations, and then the system will be inconsistent. In other words, the general equilibrium in the economy exists only when there is a unique solution for the system of joint equations.
Walras believed that the solution to the problem of general competitive equilibrium could be proved mathematically. To do this, it is necessary that the number of equations in the system and the number of unknowns in them be equal, and the equations are linearly independent. In this case, one can find a unique solution to the system and determine the values of all variables: equilibrium prices, the number of productive services (factors of production) and goods produced. At the same time, the main role in the Walrasian model is played by equilibrium prices, at which equality of supply and demand for all goods is achieved.
Walras proceeded primarily from the marginalist condition of consumer equilibrium, according to which the ratio of the marginal utility of each commodity to its price must be the same for all goods. In his opinion, according to the general competitive equilibrium model, two groups of goods move in the economy: productive services (factors of production) and finished products.
Production technology was originally assumed by Walras to be given and unchanged; this was reflected in the fixed technical cost ratios of productive services to the output of finished goods. Subsequently, he abandoned the assumption of constant technical cost factors and used the theory of distribution based on the marginal productivity of production factors.
In the Walras model four groups of equations(t + n + t + n = = 2t + 2/ 7):
- o group t equations expressing the magnitude of demand for finished products as a function of their prices;
- o group P equations expressing the supply of productive services (factors of production) as a function of their prices;
- o group t equations expressing prices finished products in the prices of consumed productive services with the help of technical coefficients of costs;
- o group P equations expressing the balance between the total number of realized productive services and the total number of consumer goods created as a result of the costs of the corresponding factors of production.
The fourth group of equations of L. Walras later became the basis for the creation of the "cost-output" model by V. Leontiev, which is widely used for analysis in macroeconomics.
The number of unknowns in the Walrasian model is 2t + 2p- 1, i.e. one less than the number of equations in the system, since the price of one of the products acts as a unit of account for expressing all other prices of productive services and finished products. In order for the system to be solved, the number of unknowns and the number of equations in the system must be equal, so Walras excludes one of the equations from the model. This is justified by the fact that in conditions of perfect competition, when all markets, except one, are in a state of equilibrium, the last market must also be in the same position. Consequently, the supply and demand equation for this market is derived from all other equations, is not independent, and can be excluded from the system.
final form system of Walras equations can be represented as an equality of supply and demand:
where t- list of final products produced;
P - list of productive services (factors of production) spent on the manufacture of products: R, - prices of final products produced; %1 - the number of final products produced; R) - prices of sold and consumed productive services (factors of production); U) - the number of sold and consumed productive services (factors of production).
As we see from this equation, the total supply of final products in monetary terms should be equal to the total demand for them, which is determined by the amount of income received by the owners for the factors of production provided by them.
The Walrasian model has only a theoretical meaning, since it characterizes an ideal competitive market. It is practically impossible to solve a system of equations for millions of product items with certain indicators of the costs of their production.
At the same time, the Walrasian theory is subject to criticism from a theoretical point of view. This is due to the fact that the equality of the number of equations and the number of unknowns is not a sufficient condition for the existence of a general equilibrium. The system of equations, as we noted earlier, may be inconsistent. If two equations are independent and compatible, but non-linear, then several solutions are possible when the curves intersect several times and there is not one, but several points of their intersection. Finally, even in the case of a single solution, it is necessary that the equilibrium prices of goods make economic sense, i.e. were positive, not negative or zero.
Despite this, the contribution of L. Walras to the development of economic theory is highly appreciated, since he was the first to use mathematical analysis to solve the problem of general equilibrium in the economy.
According to some researchers in the field of the history of economic thought, Leon Marie Esprey Walras(1834-1910) is the greatest economist of the nineteenth century. He deserved such recognition for the development of a system of general market equilibrium, which was called the closed model of economic equilibrium, set out in his main work " Elements of Pure Political Economy"(1874). Note that L. Walras was a marginalist of the first wave, and in his theory there was no concept of diminishing marginal productivity and the concept of production, but he actively used mathematical models and algebraic equations. Leon Walras used the achievements of O. Cournot in mathematical description of the economy, and on his works a whole school of economic science, which received the name of Lausanne, grew up.
Let us now consider the general equilibrium model. Leon Walras made an attempt to create a closed mathematical model of general economic equilibrium based on the principle of subjective utility, the assumption of constant productivity, and the assumption that all economic entities are divided into two groups: owners of productive services (land, labor and capital) and entrepreneurs. Walras expressed the economic links between them through a system of interrelated equations, but for simplicity of presentation, we can illustrate the course of his reasoning with the help of a diagram.
Households are the owners of factors of production (labor, capital, land) under enterprises - buyers of factors of production and at the same time producers of goods and services. As we can see, according to Walras, the owners of productive services are both sellers of these services, as well as buyers of consumer goods, and entrepreneurs are buyers of productive services and sellers of consumer products. Thus, production and consumption are connected through two interacting markets: markets for productive services (or factors of production) and consumer products.
The supply of productive services and the demand for products are linked as follows: the supply of productive services is considered as a function of market prices for these services, and the demand for products is considered as a function of the prices of productive services (since they determine the income of the owners of production factors) and the prices of these products.
Of course, the markets for factors of production and products are interconnected, but how does it follow that they are in a state of equilibrium? To answer this question, let's trace the movement of resources and products in kind and in cash. Let's start with households. The owners of the factors of production sell them in the resource market, earning income, which is nothing but the prices of the factors of production. With the income they receive, they go to the product market, exchanging them for the necessary goods and services. Let's pay attention to the fact that in the Walrasian scheme, households spend their income in full, that is, the amount of income received is equal to the amount of consumer spending, which is why there is no accumulation. Enterprises, in turn, are also connected with the resource market and with the product market. However, what is income for households (prices of production factors) is costs for enterprises, that is, payments to the owners of production factors that they cover from the gross proceeds from sales of goods and services in the product market. The circle is closed. In the Walrasian model, the prices of factors of production are equal to the costs of enterprises, which are equal to the gross receipts of enterprises, and the latter, in turn, are equal to consumer spending by households. In other words, the equilibrium state of the markets means that the demand and supply of productive services are equal, there is a constant stable price in the market for products, and the selling price of products is equal to the costs, which are the prices of factors of production.
The Walrasian model, although logically complete, is too abstract in nature, as it excludes many important elements of real economic life.
In addition to the lack of accumulation, oversimplifications include:
- static model (it is assumed that the stock and range of products are unchanged, as well as the immutability of production methods and consumer preferences),
- the assumption of the existence of perfect competition and ideal awareness of the subjects of production.
In other words, problems economic growth, innovations, changes in consumer tastes, economic cycles remained outside the Walrasian model. The merit of Walras is rather in posing the problem than in solving it. It gave impetus to economic thought to the search for models of dynamic equilibrium and economic growth. We find the development of Walrasian ideas in the works of the American economist W. Leontiev, whose algebraic theory of the analysis of the "cost-output" model in the forties of the twentieth century made it possible to numerically solve large systems of equations, called "balance equations". However, the first economist who studied the issues of dynamic development in the framework of neoclassical theory was J. Schumpeter.
Nevertheless, the model of Leon Walras became the basis for the entire theory of economic equilibrium in the neoclassical school. Yes, and those who will subsequently criticize the neoclassical theory used models based on the model of L. Walras, making the necessary changes to it.
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NON-STATE EDUCATIONAL INSTITUTION
HIGHER PROFESSIONAL EDUCATION
"SIBERIAN INSTITUTE OF BUSINESS AND INFORMATION TECHNOLOGIES"
Referat
by discipline « The main directions of economic thought»
on the topic: "Leon Walras General Equilibrium Model"
Completed by a student
1st year Kel Maria Vyacheslavovna
Group: EV-114(2)
Introduction
1. The concept and essence of general economic equilibrium
2. The theory of general economic equilibrium by L. Walras
Conclusion
Bibliography
Introduction
In the very general view equilibrium in the economy is the balance and proportionality of its main parameters, in other words, a situation where economic participants have no incentives to change the status quo.
In relation to the market, equilibrium is the correspondence between the production of goods and effective demand for them.
At the macro level, a distinction is made between partial and general equilibrium. Partial equilibrium - a quantitative correspondence of two interrelated macroeconomic parameters or individual aspects of the economy. This, for example, is the balance of production and consumption, budget revenues and expenditures, supply and demand, etc.
Unlike partial, general economic equilibrium means the conformity and coordinated development of all spheres of the economic system.
General equilibrium analysis can be very useful for assessing the overall functioning of the economy, for understanding special economic problems and for policy making, which makes the research topic relevant.
Thus, the object of study is the general economic equilibrium.
The problem of general economic equilibrium was studied by various schools and scientists, such as Quesnay, Keynes, Marx, Pareto, Friedman, Samuelson, and others. However, the very concept of general economic equilibrium was developed by L. Walras. The scientist formulated the basic conditions for the structural correspondence of demand and supply of goods, quantitatively described the relationship between the key economic parameters of production and exchange within the framework of a simple auction scheme.
The aim of the work is to study the concept of general economic equilibrium.
To achieve this goal, it is necessary to perform the following tasks: define the concept and study the essence of general economic equilibrium; consider the theory of general economic equilibrium by L. Walras; explore the interaction of markets as an equilibrium factor; analyze the joint equilibrium in the markets for goods, money and capital.
The main task of economists is to find out which imbalances are important for the analysis of this issue, and which can be neglected. In any case, understanding the moment of general equilibrium is mandatory for the analysis and evaluation of the economy, which is of practical importance in economic forecasting and planning.
1. The concept and essence of general economic equilibrium
economic equilibrium capital
Macroeconomic equilibrium is the central problem of the national economy and a key category of economic theory and economic policy. It characterizes the balance and proportionality of economic processes: production and consumption, supply and demand, production costs and results, material and financial flows. Equilibrium reflects the choice that suits everyone in society.
At the level of microeconomics, the problem of equilibrium is considered in relation to a separate market - partial equilibrium, i.e. equilibrium in a single market for goods and services, factors of production.
However, in real life the economy of each country is a set of markets for individual goods, intertwined with a complex system of relationships. This is explained by the fact that all producers are also consumers at the same time, and all goods are either directly or indirectly related to each other as components of the total commodity mass in the form of interchangeable or complementary goods.
General equilibrium is the equilibrium state of the entire market system, which is understood as the establishment of equality of supply and demand in all interconnected markets. Kamaev V.D. Textbook on the fundamentals of economic theory. - M., 2007. - S. 62.
A more precise definition of the general economic equilibrium is given in the economic dictionary - "the equilibrium state of the economy, emerging as a result of the balancing interaction of demand for goods, services, resources, their supply in the markets and the price system formed under the influence of supply and demand." Raizberg B.A., Lozovsky L.Sh., Starodubtseva E.B. Modern economic dictionary. - M., 2006. - S. 96.
General equilibrium, in contrast to partial equilibrium, is achieved much more difficultly and less frequently. In the market for final goods and services, equilibrium will mean that producers maximize income, and consumers receive maximum utility from the products they buy. Equilibrium in the market of factors of production shows that all the production resources entering it have found their buyer, and the marginal income of resource owners, which forms demand, is equal to the marginal product of each resource, which forms supply. Equilibrium in the money market characterizes the situation when the number of expected Money is equal to the amount of money that the population and entrepreneurs want to have.
Under conditions of free competition, the set of prices for goods corresponds to a state of general equilibrium if the following three conditions are satisfied:
1) all consumers maximize their utility under given budget constraints;
2) all firms maximize their profits with this technology;
3) for each product, the supply is equal to the demand.
“The general equilibrium model includes two types of markets - goods and factors of production - in the general circulation. General equilibrium will be reached when both types of markets - goods and factors - are simultaneously in a state of equilibrium. Sidorovich A.V. Economic theory. - M., 2008. - S. 51.
Distinguish between ideal and real equilibrium.
The ideal (theoretically desired) equilibrium is achieved in the economic behavior of individuals with the full optimal realization of their interests in all structural elements, sectors, and spheres of the national economy.
Achieving such an equilibrium presupposes the observance of the following conditions of reproduction:
All individuals must find commodities on the market;
All entrepreneurs must find factors of production on the market;
The entire product of last year must be sold.
The ideal balance comes from the prerequisites of perfect competition and the absence of externalities - side effects.
In the real economy, various violations of these requirements are observed. Cyclical and structural crises, inflation bring the economy out of balance. At the same time, even in the conditions of these disproportions, the economic system can be brought into a dynamic equilibrium that will reflect market realities with all their contradictions.
“The real macroeconomic equilibrium is the equilibrium that is established in the economic system under conditions of imperfect competition and external factors impact on the market."
To understand the specifics of the current economic situation and conduct economic policy, it is important to establish whether the economic equilibrium is stable or unstable. If, in response to an external impulse that disturbs the equilibrium, the system itself returns to an equilibrium state under the influence of internal forces, then such an equilibrium is called stable, but if it does not recover on its own, then it is unstable. Therefore, along with determining the conditions for establishing a general economic equilibrium, it is necessary to investigate whether it will be stable or not. Storchevoi M.A. Fundamentals of Economics / ed. P.A. Vatnik. - SPb., 2009. - S. 68.
The achievement of general economic equilibrium does not mean that now every participant in the market economy is satisfied with his position; equilibrium simply states that by changing the volume and structure of purchases or sales, no one will be able to improve their well-being under the prevailing conditions.
The general economic equilibrium is not a typical state of a market economy, since the plans of sovereign entities, developed independently from each other, can only occasionally be mutually agreed upon. Due to the constantly changing needs of the population and production technology, the economy is more often in a state of transition from one equilibrium state to another. Therefore, in reality, both individual markets and the national economy as a whole more often find themselves in a non-equilibrium than in an equilibrium state. However, the behavior of economic entities in a market economy tends to balance it: until the plans of participants in market transactions are coordinated, they will adjust the economic situation through changes in supply and demand. Grebennikov P.I., Leussky A.I., Tarasevich L.S. Macroeconomics. - M., 2006. - S. 45.
Thus, the general economic equilibrium characterizes the coincidence of the plans of all buyers regarding the volume of purchases with the plans of sellers regarding the volume of sales. The discrepancy between these plans causes disequilibrium in the national economy.
To determine the state of general economic equilibrium means to find out under what conditions all participants in the market economy will be able to realize their intended goals. Therefore, economic equilibrium corresponds not only to a certain volume and structure of the supply of goods, but also to the satisfaction of each participant in market transactions with the implementation of their plans.
General economic equilibrium means that by changing the volume and structure of purchases or sales, no one will be able to improve their well-being under the current conditions.
2. The theory of general economic equilibriumL. Walras
In economics, there are many models of macroeconomic equilibrium that reflect the views of different areas of economic thought on this problem:
F. Quesnay model of simple reproduction on the example of the French economy of the XVIII century;
K. Marx schemes of simple and extended capitalist social reproduction;
L. Walras model of general economic equilibrium under the conditions of the law of free competition;
V. Leontiev "costs of output" model;
J. Keynes model of short-term economic equilibrium.
Let us consider in more detail the model of general economic equilibrium of L. Walras.
According to some researchers in the field of the history of economic thought, L. Walras (1834--1910) is the greatest economist of the nineteenth century. He deserved such recognition for the development of a system of general market equilibrium, which was called the closed model of economic equilibrium, set out in his main work, The Elements of Pure Political Economy (1874).
General equilibrium involves the establishment of equilibrium in exchange and production. Equilibrium in exchange means that the effective (actual) demand for productive services (products) is equal to the effective supply of productive services (products). Equilibrium in production means that the price of each product is equal to the cost of its production, including the normal profit as a reward for capital.
Such a state of equilibrium in production and exchange is an ideal case, not a real one. It never happens that the selling price of a product exactly equals the cost of producing this good, just as there is no exact correspondence between effective demand and efficient supply. But such a state can be called normal in the sense that an economy operating in conditions of absolutely free competition strives for it. In such a situation, if the price of the product exceeds the cost of its production, entrepreneurs receive excess profits and begin to expand production. If the price of the product is lower than the cost of its production, entrepreneurs incur losses and begin to reduce output. As a result, the prices of final goods change and a general equilibrium is established. Agapova I. History of economic thought. - M., 2008. - S. 126
Consider, for the sake of simplicity, a model of a barter economy in which there is no production.
This economy has n goods, and nth good acts as a unit of account, or money. The price of each good is expressed in this unit of account.
Let Pi/Pn be the price of the i-th good divided by the price of the n-th good (relative price).
Suppose that Pn =1, then the price of the i-th good will be equal to Pi.
At the beginning of the exchange, each business entity has a certain stock (allotment) of various goods, including money. The total utility of this stock depends on the marginal utility of each good at the disposal of the individual. The individual's goal is to maximize his utility. He can achieve this by exchanging goods belonging to him with less marginal utility for goods belonging to other individuals and representing greater utility for him. Naturally, in this case, the marginal utility of each good is weighted taking into account its relative price (Gossen's second law), as well as the relative prices of other goods. Therefore, the demand for i-th benefit just like the supply of this good, there are functions of the relative prices of all goods:
Di = Di(P1,..., Pn-1);
Si = Si(P1,..., Pn-1).
General economic equilibrium means that supply and demand in each market are equal, that is, the amount of a good offered for sale is equal to the amount of a good that buyers are willing to purchase. The equality of these quantities is ensured by the relative price of the good. The equilibrium price is established in the Walrasian model during the so-called "groping" process.
There is a special person in the market - the auctioneer - who observes the course of affairs in the economy and shouts out the relative prices of goods. Then the participants in the exchange tell the auctioneer how much of this or that good they would like to sell or buy at given prices. If at the same time demand is not equal to supply (there is an excess of demand (Di > Si) or an excess of supply (Di< Si), аукционщик назначает новые цены. Причем здесь действует следующее правило: если был избыток спроса, - цена повышается, если избыток предложения, - цена понижается. Обмен состоится только тогда, когда набор относительных цен, объявленный аукционщиком, окажется равновесным.
Mathematically, to find this set, consisting of n-1 prices, it is necessary to solve n-1 equations (the price of the n-th good - money - is given):
Di(P1,..., Pn-1) = Si(P1,..., Pn-1); i = 1,.. n-1.
The number of equations here is equal to the number of unknowns, and therefore this system will have a unique solution, i.e., an equilibrium set of relative prices exists and it is unique. From this we can deduce the so-called Walrasian law:
which states that the value of aggregate demand is equal to the value of aggregate supply. Galperin V. M. Macroeconomics. - SPb., 2005. - P. 124 In other words, the sum of excess supply and demand in all markets must always equal zero. Therefore, if n-1 is in equilibrium (i.e., there is neither excess demand nor excess supply on any of them), then nth market should also be in balance.
Thus, Walras's law by no means assumes that the economy is always in equilibrium, that is, there is no excess supply or demand in all markets. It's just that at the level of the entire national economy, all these surpluses, in terms of value, "mutually cancel each other out."
As can be seen from the general equilibrium model, money plays a passive role in it as a unit of account (measure of value), in which the value of other goods is expressed. Here it is necessary to distinguish between relative and absolute prices. Relative price is the price of one good relative to the price of another good. The absolute price is the price of money (Pn), or the general price level. Business entities are only interested in relative prices. The absolute price depends on the amount of money in circulation. A change in the money supply leads to a proportional change in the absolute price level. Thus, if the quantity of money triples, then the absolute prices must also triple: the price of each good triples, and the relative prices remain unchanged. As a consequence, a change in the money supply does not entail a change in real values (asked and offered quantities of goods). Tarasevich L.S., Grebennikov P.I., Leussky A.I. Macroeconomics. - M., 2006. - S. 47.
In addition, due to the actions of the auctioneer, in the Walrasian model of general equilibrium, buying and selling turn out to be absolutely synchronized in time. Therefore, economic entities do not have incentives to use money as a medium of exchange and a store of value. Thus, using the model of L. Walras, it is impossible to explain the existence of money in a market economy.
The Walrasian model, although logically complete, is too abstract in nature, as it excludes many important elements of real economic life.
In addition to the lack of accumulation, oversimplifications include:
Static model (it is assumed that the stock and range of products are unchanged, as well as the immutability of production methods and consumer preferences),
The assumption of the existence of perfect competition and ideal awareness of the subjects of production.
In other words, the problems of economic growth, innovation, changing consumer tastes, economic cycles remained outside the Walrasian model. The merit of Walras is rather in posing the problem than in solving it. It gave impetus to economic thought to the search for models of dynamic equilibrium and economic growth. We find the development of Walrasian ideas in the works of the American economist W. Leontiev, whose algebraic theory of the analysis of the "cost-output" model in the forties of the twentieth century made it possible to numerically solve large systems of equations, called "balance equations". However, the first economist who studied the issues of dynamic development in the framework of neoclassical theory was J. Schumpeter.
Nevertheless, the model of Leon Walras became the basis for the entire theory of economic equilibrium in the neoclassical school. Even those who would criticize the neoclassical theory in the future used models based on the model of L. Walras, making the necessary changes to it.
"Full economic equilibrium is the structural optimum of the economic system, to which society strives, but never fully achieves it due to the constant change of the optimum itself, the ideal of proportionality." Samuelson P. Economics. - M., 2005. - S. 159.
The fundamental possibility of achieving general equilibrium under conditions of perfect competition in mathematical form was first proved by L. Walras. Expressing the ERM model as a system of equations, he proved that in an economic system consisting of n interconnected markets, on nth market there will always be equilibrium if equilibrium is reached in the (n-1)th market. It should be noted that the model of L. Walras was subjected to critical analysis by many authors.
Conclusion
In this term paper we have considered the main theoretical and practical aspects related to the general economic equilibrium. Based on the study, the following conclusions can be drawn.
The most important economic problem is the problem of general economic equilibrium - the choice in which the way in which limited production resources (labor, land, capital) are used to create various goods and their distribution among different members of society is balanced.
General economic equilibrium, according to Walras, “is the state in which the effective supply and effective demand for productive services are equalized in the services market, the efficient supply and effective demand for products are equalized in the product market, and, finally, the selling price is equal to the cost of production, expressed in terms of productive services.
Usually, equilibrium is achieved either by limiting needs (in the market they always act as effective demand), or by increasing and optimizing the use of resources.
As you know, the economy is in constant motion, continuous development: the phases of the cycle, the conjuncture, incomes change, there are shifts in demand. All this suggests that the equilibrium state can only conditionally be considered as static.
General economic equilibrium is the balance of the entire economy of the country, a system of interrelated and mutually agreed proportions in all spheres, industries, in all markets, for all participants in economic activity, ensuring the normal development of the national economy.
Using the analysis of the Walrasian model, we determined that in a state of market equilibrium, aggregate demand is equal to aggregate supply.
Literature
1. Agapova I. History of economic thought. - M., 2008;
2. Galperin V. M. Macroeconomics. - St. Petersburg, 2005;
3. Grebennikov P.I., Leussky A.I., Tarasevich L.S. Macroeconomics. - M., 2006;
4. Kamaev V.D. Textbook on the fundamentals of economic theory. - M., 2007;
5. Raizberg B.A., Lozovsky L.Sh., Starodubtseva E.B. Modern economic dictionary. - M., 2006;
6. Samuelson P. Economics. - M., 2005;
7. Sidorovich A.V. Economic theory. - M., 2008;
8. Storchevoi M.A. Fundamentals of Economics / ed. P.A. Vatnik. - St. Petersburg, 2009;
9. Tarasevich L.S., Grebennikov P.I., Leusskii A.I. Macroeconomics. - M., 2006.
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The concept of general economic equilibrium, the essence of the corresponding theory of L. Walras. Problems of interaction of markets, features of the study of this phenomenon as a factor of balance. Joint equilibrium in the markets of goods, money and capital (model IS-LM).
term paper, added 01/29/2014
Biography of Leon Walras. Contribution to pure economic theory. Theory of General Equilibrium. The social philosophy of Walras. Walras proposed the concept of general economic equilibrium. Mathematization of economic theory.
abstract, added 12/13/2002
Features of determining the level of GDP and national income in the framework of the classical general equilibrium model. The distribution of income between employees and owners of firms. Volume of product purchases. Tools for achieving general economic balance.
report, added 03/25/2012
Model of general economic and macroeconomic equilibrium. Marginal Utility Functions and Marginal Productivity Functions. The distribution of stocks of factors of production depending on the preferences of consumers. Demand and supply functions.
test, added 06/04/2013
Characteristics of partial and general economic equilibrium (supply and demand). Interaction of goods markets and factors of production. Features of economic equilibrium according to Pareto - the Italian representative of neoclassical economic theory.
test, added 07/08/2010
The concept of "human factor". The essence of the marginalist revolution. Model of general economic equilibrium by L. Walras. Quantitative and qualitative characteristics of labor resources. Bank profit and its use. The gold standard and its evolution.
cheat sheet, added 01/15/2014
Partial and general equilibrium: consumer and producer equilibrium. feedback effect. Walras' general equilibrium model. Exchange efficiency analysis using the Edgeworth box. Production efficiency, production contract curve.
abstract, added 08/15/2015
Microeconomic balance of consumer and producer. Theories of achieving economic equilibrium. Supply and demand function L. Walras. Equilibrium according to A. Marshal. The mechanism of self-regulation of the market economy and government intervention.
term paper, added 02/28/2010
The history of the emergence of the theory of marginalism. Concepts. Austrian, Cambridge, American, Lausanne schools of marginalism. Methodology of economic analysis of Walras. General economic equilibrium model. The development of the teachings of the Lausanne school of Pareto.
