L2.12 - Competitive Equilibrium - Example (Substitutes Case)

[@AshishOmGourav]

Thanks a lot, Sir!...These videos are a saviour. I had always skipped General Equilibrium. Now, I feel I was missing this!!!

[@賴維浩-s4q]

It helps a lot! Thanks for your video.

[@econ.school]

Most welcome.

[@rahulramesh4922]

sir, at px = 1/2, by using budget line constraint, we get that (10,5) and (0,5) are the equilibrium allocation right? Similarly, for px = 2, we get (5,0) and (5,10) as equilibrium allocation

[@sulaimanqizilbash4248]

Sir, I could not understand why is Consumer 1 indifferent at the price px = 1/2? Is it related to the result (Marginal utility of x)/(Marginal utility of y)=1/2?

[@EconomistYT]

sir, but endowment itself is not a pareto efficient allocation than how it could be a competitive equilibrium allocation?

[@AmitKumarGoyal]

Endowment allocation is Pareto Efficient.

[@chogibop3572]

Thankyou sir!!

[@econ.school]

Most welcome!

[@ishasingh9534]

Why would X=2 be an equilibrium? Individual B 'CAN CHOOSE' anything on the budget line. Px = 2 is given. If he wants to buy 10 units [on the BL], so that equilibrium DD = SS [since A's demand for X at Px =2 is 0] , then B must have 20 units of income which is not possible as per his endowment allocation (0,10) and prices (2,1).