Computation of General Equilibria

Abstract

The Walrasian model of economic equilibrium is a generalization to the entire economy of the basic notion that prices move to levels that equilibrate supply and demand. Although the model avoids some factors of economic significance, it is extremely useful in helping us evaluate the effects of changes in economic policy or the economic environment. A moderately realistic model designed to illustrate a significant economic issue typically involves a large system of highly nonlinear equations and inequalities. Existence of a solution is demonstrated by non-constructive fixed point theorems. The explicit numerical solution of such a model requires sophisticated computational techniques.

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