Walrasian auctionA Walrasian auction, introduced by Léon Walras, is a type of simultaneous auction where each agent calculates its demand for the good at every possible price and submits this to an auctioneer. The price is then set so that the total demand across all agents equals the total amount of the good. Thus, a Walrasian auction perfectly matches the supply and the demand. Walras suggested that equilibrium would always be achieved through a process of tâtonnement (French for "trial and error"), a form of hill climbing.
Walras's lawWalras's law is a principle in general equilibrium theory asserting that budget constraints imply that the values of excess demand (or, conversely, excess market supplies) must sum to zero regardless of whether the prices are general equilibrium prices. That is: where is the price of good j and and are the demand and supply respectively of good j. Walras's law is named after the economist Léon Walras of the University of Lausanne who formulated the concept in his Elements of Pure Economics of 1874.
Linear utilityIn economics and consumer theory, a linear utility function is a function of the form: or, in vector form: where: is the number of different goods in the economy. is a vector of size that represents a bundle. The element represents the amount of good in the bundle. is a vector of size that represents the subjective preferences of the consumer. The element represents the relative value that the consumer assigns to good . If , this means that the consumer thinks that product is totally worthless.
Exchange economyExchange economy is technical term used in microeconomics research to describe interaction between several agents. In the market, the agent is the subject of exchange and the good is the object of exchange. Each agent brings his/her own endowment, and they can exchange products among them based on a price system. Two types of exchange economy are studied: In a pure exchange economy, all agents are consumers; there is no production and all agents can do is exchange their initial endowments.
General equilibrium theoryIn economics, general equilibrium theory attempts to explain the behavior of supply, demand, and prices in a whole economy with several or many interacting markets, by seeking to prove that the interaction of demand and supply will result in an overall general equilibrium. General equilibrium theory contrasts with the theory of partial equilibrium, which analyzes a specific part of an economy while its other factors are held constant.
Complementary goodIn economics, a complementary good is a good whose appeal increases with the popularity of its complement. Technically, it displays a negative cross elasticity of demand and that demand for it increases when the price of another good decreases. If is a complement to , an increase in the price of will result in a negative movement along the demand curve of and cause the demand curve for to shift inward; less of each good will be demanded.
Substitute goodIn microeconomics, two goods are substitutes if the products could be used for the same purpose by the consumers. That is, a consumer perceives both goods as similar or comparable, so that having more of one good causes the consumer to desire less of the other good. Contrary to complementary goods and independent goods, substitute goods may replace each other in use due to changing economic conditions. An example of substitute goods is Coca-Cola and Pepsi; the interchangeable aspect of these goods is due to the similarity of the purpose they serve, i.
Pareto efficiencyPareto efficiency or Pareto optimality is a situation where no action or allocation is available that makes one individual better off without making another worse off. The concept is named after Vilfredo Pareto (1848–1923), Italian civil engineer and economist, who used the concept in his studies of economic efficiency and income distribution. The following three concepts are closely related: Given an initial situation, a Pareto improvement is a new situation where some agents will gain, and no agents will lose.
Welfare economicsWelfare economics is a field of economics that applies microeconomic techniques to evaluate the overall well-being (welfare) of a society. This evaluation is typically done at the economy-wide level, and attempts to assess the distribution of resources and opportunities among members of society. The principles of welfare economics are often used to inform public economics, which focuses on the ways in which government intervention can improve social welfare.
PriceA price is the (usually not negative) quantity of payment or compensation expected, required, or given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the commercial exchange, the payment for this product will likely be called its "price". However, if the product is "service", there will be other possible names for this product's name.
