chapter  5
28 Pages

Computable general equilibrium modelling

Theoretical foundations Basics of general equilibrium The theory underpinning computable general equilibrium (CGE) modelling is Walrasian general equilibrium theory, which shows that the demand and supply in an economy can achieve a general equilibrium with the interaction and interdependence of individual markets and agents. Compared to general equilibrium theory, a partial equilibrium analysis considers the determination of prices for some products only, assuming that the prices for other products are constant.