MICROECONOMICS PRINCIPLES WITH ETHICS

MODULE 3: The Pure Exchange Model

Textbook Reading:

Presentation Slides:

Additional Useful Information:

Edgeworth Box
An in-depth account from Wikipedia. It illustrates many other issues that can be addressed using this construct.

Edgeworth Box
A brief description from the online financial dictionary.

OVERVIEW

In this module we introduce the pure exchange model, a story about two people, Smith and Jones, coming together in a market to exchange apples for oranges. The assumptions are used to construct an Edgeworth box and to demonstrate how mutually voluntary exchange made with perfect information results in a mutually beneficial outcome for both traders.

VIDEO LECTURES

Assumptions of the Pure Exchange Model - 20 minutes

Constructing an Edgeworth Box - 22 minutes

Determining the Terms of Trade in an Edgeworth Box - 9 minutes

Implications of the Pure Exchange Model - 6 minutes

Pareto Optimality and Utility Max in an Edgeworth Box- 20 minutes