Tuesday, April 13, 2010

Consumer A's Offer Curve

I've tried to keep the videos brief, so many of the implicit assumptions are left unsaid. An engaged student might ask, "If this is an exchange economy with barter, why are there market prices?" That's a good question. The answer is to tell a story, but not give a model of a replication economy where there are many consumers who are just like Consumer A and likewise many consumers just like Consumer B. Indeed there are some many "clones" that each is negligible relative to the total. This is the situations that underlies the model of perfect competition, so it is natural to ask in this setting how Consumer A (and by inference also how Consumer B) would act in the presence of market prices.

This is the audio only in case the student prefers to play with the spreadsheet while listening.