General Equilibrium

In this chapter we discuss the meaning of general equilibrium in eco­nomics. We explain the proof of the existence of equilibria in a simple case, that of an exchange economy and describe how this context may be generalised to an economy with production. We show that equilibria are efficient in the sense of Pareto. We show how the problems of stability and uniqueness of equilibria have posed major difficulties for standard economic theory. We conclude by examining the problems that arise when one considers the nature of equilibria in more general economic settings.