Model overview
Exchange Economies
Two consumers, two goods, fixed endowments — and a price that makes everyone's optimisation add up. The Edgeworth box, the contract curve, and the welfare theorems.
Navigate the learning sections below, then move into the interactive model once you want to experiment with parameters.
Introduction
What an exchange economy is and why it underpins all of general equilibrium.
Endowments, Allocations, Feasibility
The primitives of an exchange economy and the Edgeworth box that makes them visible.
Preferences, MRS, and Individual Rationality
How agents rank bundles and why no one trades to a worse outcome.
Pareto Efficiency and the Contract Curve
The locus of allocations where no further mutually beneficial trade is possible.
Walrasian Equilibrium
Derive the price that clears both markets and the allocation it implies.
The Edgeworth Box, Live
Move endowments and preferences and watch the equilibrium price, the budget line, and the contract curve recompute.
First and Second Welfare Theorems
The two results that turn equilibrium analysis into normative theory.
When Walrasian Equilibrium Fails
Non-existence, multiplicity, and the assumptions that quietly do the work.
A Worked Example, End to End
Plug concrete numbers into every formula from §5 — two Cobb-Douglas agents, fixed endowments — and grind through to the Walrasian allocation.
When One Agent Has Linear Preferences
A second worked example: one Cobb-Douglas agent, one perfect-substitutes agent, and interior endowments. The linear agent pins the price and trades at zero net gain.