General Equilibrium and welfare economies Essay

General Equilibrium and welf be economies - Essay ExampleA deductive structure that tolerates a contradiction does so under the penalty of being useless since whatsoever control can be derived flawlessly and immediately from that contradiction. In its mathematical form, economic theory is open to an streamlined scrutiny for logical errors.We will try to be coherent, and we will do our best to avoid any contradiction when speaking about General Equilibrium and Welfare Economics. It is easy to get confused with these microeconomic places, so we will deal with them using simple and logical words. The most important thing is to record those models and to apply the knowledge in our everyday life as much as possible.Microeconomics is defined by the Wikipedia (2005d) as the study of the economic behaviour of individual consumers, firms, and industries and the distribution of production and income among them. It considers individuals both as suppliers of wear out and capital and as the ultimate consumers of the final product. It analyzes firms both as suppliers of products and as consumers of labour and capital.It is necessary to hear this simple definition to apply that knowledge to General Equilibrium and Welfare Economics. ... Harberger (2002) speaks about the importance of Microeconomics as follows The strength of microeconomics comes from the simplicity of its underlying structure and its close touch with the real world. In a nutshell, microeconomics has to do with add up and demand, and with the way they interact in various markets. In microeconomic theory, the partial equilibrium supply and demand economic model was originally conceived by Alfred Marshall when he tried to explain changes in the price and quantity of goods sold in warring markets. This microeconomic model just deals with an imperfectly competitive market. It has its foundation in the theories used by some economists before Marshall like Adam Smith, and it is single of the most fundament al models of economic schools in the present time, widely used as a staple fiber building block for many other economic models. The theory of supply and demand is important for intellect a market economy as it is an explanation of the mechanism by which many economic decisions are made. Nevertheless, unlike General Equilibrium models, the supply and demand theory offers a partial equilibrium model fixed by unexplained forces. (Wikipedia, 2005d).The theory of supply and demand frequently considers that markets are perfectly competitive. This mode that there are many buyers and sellers in the market. It also means that none of them have the capacity to solve the price of the good. In real life, this assumption usually fails because some economic agents have the ability to work on prices. (Wikipedia, 2005d).Wikipedia, 2005hIn Microeconomics we say that the market clears at the point where the supply and demand find a proportion at a wedded price. It means that the amount of a co mmodity at a given price equals the