GENERAL EQUILIBRIUM

General equilibrium is a central concept of economic theory. Unlike partial equilibrium analysis which study the equilibrium of a \nparticular market under the clause “ceteris paribus” that revenues and prices on the other markets stay approximately unaffected, \nthe ambition of a general equilibrium model is to analyze the simultaneous equilibrium in all markets of a competitive economy. \nDefinition of the abstract model, some of its basic results and insights are presented. The important issues of uniqueness and local \nuniqueness of equilibrium are sketched; they are the condition for a predictive power of the theory and its ability to allow for \nstatics comparisons. Finally, we review the main extensions of the general equilibrium model. Besides the natural extensions to \ninfinitely many commodities and to a continuum of agents, some examples show how economic theory can accommodate the \nmain ideas in order to study some contexts which were not thought of by the initial model.