Question:
Walras’ Law implies that if there are \( N \) markets in the economy, then one only needs to find equilibrium prices in
Walras’ Law implies that if there are \( N \) markets in the economy, then one only needs to find equilibrium prices in
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Walras' Law helps reduce the number of markets that need to be solved to find equilibrium prices. You only need to find prices for \( N - 1 \) markets.
Updated On: Dec 19, 2025
- \( N - 2 \) markets
- \( N - 1 \) markets
- \( N + 1 \) markets
- all the \( N \) markets
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The Correct Option is B
Solution and Explanation
Walras' Law states that in an economy with \( N \) markets, the total value of excess demand across all markets must be zero. This implies that if we find equilibrium prices for \( N - 1 \) markets, the price in the remaining market will automatically adjust to ensure market equilibrium.
Step 1: In a general equilibrium system, the number of independent equations is \( N - 1 \), because the market for one good can be determined by the others.
Step 2: Conclusion.
Thus, only \( N - 1 \) markets need to be solved for equilibrium prices.
Final Answer: (B) \( N - 1 \) markets
Step 1: In a general equilibrium system, the number of independent equations is \( N - 1 \), because the market for one good can be determined by the others.
Step 2: Conclusion.
Thus, only \( N - 1 \) markets need to be solved for equilibrium prices.
Final Answer: (B) \( N - 1 \) markets
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