~ HUNTER’s POV ~
“Define the general equilibrium theory,” I said to Maia as I held the Intro to Econ textbook in a way where she couldn’t see the answer.
Maia thought for a moment before replying, “It’s the behavior of supply, demand, and prices in a whole economy with several or many interacting markets… by seeking to prove that the interaction of demand and supply will result in an overall general equilibrium,”
“Good,” I nodded my head approvingly. “And what’s the first fundamental theorem of Welfare Economics?”
“The First Fundamental Welfare Theorem asserts that market equilibrium are Pareto efficient. In a pure exchange economy, a sufficient condition for the first welfare theorem to hold is that preferences be locally non-satiated,” she answered with a triumphant smile
