Comparative Statics and Welfare Theorems When Goods Are Normal
We examine the impact of the normality assumption, together with the weak axiom, in three related areas of general equilibrium theory. Most obviously, these properties have important implications for equilibrium comparative statics, in the context of exchange, production or (incomplete) financial economies. They also shed light on the relationship between comparative statics and the structure of the excess demand function, which could be thought of as an aspect of the correspondence principle (Samuelson (1947)). Lastly, these properties permit the construction of welfare-like theorems which do not rely on the classical assumptions of individual rationality.
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