StudentShare solutions
Triangle menu
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

L. Walras Concept of Equilibrium - Assignment Example

Nobody downloaded yet
Prices are quoted in the market for each commodity at each instant of the trading process; b. The traders are price takers and they behave competitively i.e. the existence of perfect competition; and c. For any commodity, any transaction is not allowed to take place out of the equilibrium. According to Walras (1874), considering any particular market, if all other markets in an economy are in equilibrium, then that specific market must also be in equilibrium. Also, the sum of all excess demands and excess supplies (which have both positive and negative values) must be equal to zero. The equilibrium is attained through a process called “groping” in which each agent calculates its demand for a particular commodity and submits it to an auctioneer. This auctioneer matches the supply and demand of the commodities and tries to reach an equilibrium price. “Trading stops” at the point where the demand and supply for all the commodities with positive prices equate and demand for goods with a price of zero does not exceed their supply (Walras, 1954). At this point, equilibrium is achieved by the process of Groping. Answer 2 The two actors i.e. households and firms both face the problem of scarcity and choice. In the case of households, they attempt to spend their scarce resources, i.e. income, on those goods and in such a way that gives them the maximum utility. They have to bear the opportunity cost when they forgo the benefit of one commodity to avail the benefit of another. According to the law of diminishing marginal utility, as a person consumes more and more units of a commodity, he obtains less and less amount of satisfaction from every additional unit that he consumes. A point comes when the additional utility even becomes negative. For instance, over-consumption of drinking water is harmful to health According to the principle; the total utility is maximized when utilities obtained from each of the commodities consumed become equal. (Samuelson, 1939) The firms face the same problem and they want to utilize their scarce resources, i.e. factors of production, in such a way that maximizes their profits. Just like the households, they too have to bear the opportunity cost when they forgo the usage of one factor to avail the benefit of another factor. The law of diminishing returns is similar to the working of the law of diminishing utility according to which as more and more units of a factor are employed with other factors remaining constant, the marginal product diminishes. Similarly, a point comes when the marginal product becomes negative. For instance, a certain number of units of labor can produce effects on a unit of land. More than enough units cause disturbance and disharmony in the working environment. The principle can also be applied to firms. The total product is maximized when marginal products of all the factors employed become equal. (Samuelson, 1939) Therefore, the two actors have to undergo the same processes to achieve their respective objectives. Answer 3 In Marshallian long-period equilibrium, the economies and diseconomies of scale determine whether an industry will be operating under increasing, decreasing or constant returns to scale. When the economies and diseconomies of scale are equal, they cancel each other and there is no net effect on the industry.  ...Show more
Cite this document
  • APA
  • MLA
(“L. Walras Concept of Equilibrium Assignment Example | Topics and Well Written Essays - 2750 words”, n.d.)
Retrieved from
(L. Walras Concept of Equilibrium Assignment Example | Topics and Well Written Essays - 2750 Words)
“L. Walras Concept of Equilibrium Assignment Example | Topics and Well Written Essays - 2750 Words”, n.d.
  • Cited: 0 times


In the paper “L. Walras’ Concept of Equilibrium” the author contrasts and compares L. Walras’ concept of equilibrium and Marshall’s partial equilibrium. The first and main difference is that of scope. In Marshall’s partial equilibrium, the price of only one good is determined…
L. Walras Concept of Equilibrium
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the assignment on your topic
"L. Walras Concept of Equilibrium"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

What are the strengths and weaknesses of general equilibrium as an organising concept
The Concept of General Equilibrium. The concept of general equilibrium is considered to be an integral part of theoretical economics. It desires to present a hypothetical model of market equilibrium in the context of economic theory. The concept of general equilibrium acts best in regards to some propositions that can be underlined as follows.
9 pages (2250 words) Essay
Market equilibrium
A change in demand occurs when the demand curve shifts due to changes in demand determinants such as income, buyer preferences, expectations, prices of other goods, etc (Hobday, 1999). Law of supply states that as the price of a product rises, keeping all other factors constant, one would be willing to supply more for sale.
2 pages (500 words) Essay
Broken window concept and it connection to social disorder, as described by George L. Kelling
rder, produces further crime and cycles of urban decline Criminal justice professionals should use this concept to predict and prevent crimes and protect citizens from possible crimes. Following Kelling, incivilities and signs of disorder causes a feeling that no one cares,
3 pages (750 words) Essay
Static Equilibrium
This condition may not necessarily insinuate that the forces acting upon it are equal. Therefore, the total amount of force of the object is zero (0m/s/s). Objects in a state of equilibrium have an acceleration of 0m/s/s,
2 pages (500 words) Coursework
In 2007, the potato chip industry in the Northwest was competitively structured and in long-run competitive equilibrium; firms were earning a normal rate of return and were competing in a monopolistically competitive market structure. In 2008, two smart l
t up all the firms and began operations as a monopoly called “Wonks.” To operate efficiently, Wonks employed a management consulting company, which projected a diverse long-run competitive equilibrium. This paper is aimed at providing a descriptive and analytical structure
5 pages (1250 words) Term Paper
Market equilibrium
If we consider the demand of homes in the market, income is a determinant since it lowers or increases demand for the commodity. High population will increase
2 pages (500 words) Research Paper
irms in the industry will maximizes its profits in the short run while they cannot make bigger profits through alteration of the prices of milk, thus, in the short run, the firm may make super-normal profits. In the short-run, the firms will not necessarily need to make profits
1 pages (250 words) Essay
This translates to raising revenue. This is what is termed as price effect. On the other hand, after a price increase, in another dimension, it could also mean fewer units of the goods will be sold. This has the effect of lowering revenue. Price elasticity
1 pages (250 words) Essay
Market equilibrium
Exchange of goods and services constitutes market and is subject to natural or artificial forces (Dwivedi,2010). The goal of the society has remained achieving equilibrium in the market.
3 pages (750 words) Research Paper
des calculation of the radiance balance (heat fluxes, heat conduction) and mass balance (freezing, snow accumulation, melt, evaporation) for the three chosen glaciers in Nepal. It was found that the glaciers in the humid areas show the increased mass wastage comparing
1 pages (250 words) Book Report/Review
Comments (0)
Click to create a comment
Let us find you another Assignment on topic L. Walras Concept of Equilibrium for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us