Walras's Law (CUESTIONARIO)

 Answer the questions about the text

Understanding Walras's Law

Walras's law is named after French economist Léon Walras (1834 - 1910), who created general equilibrium theory and founded the Lausanne School of economics. Walras's famous insights can be found in the book Elements of Pure Economics, published in 1874. Walras, along with William Jevons and Carl Menger, were considered founding fathers of neoclassical economics.

Walras's law assumes that the invisible hand is at work to settle markets into equilibrium. Where there is excess demand, the invisible hand will raise prices; where there is excess supply, the hand will lower prices for consumers to drive markets into a state of balance.

Producers, for their part, will respond rationally to changes in interest rates. If rates rise they will reduce production and if they fall they will invest more in manufacturing facilities. Walras predicated all of these theoretical dynamics upon the assumptions that consumers pursue self-interests and that firms try to maximize profits.

Limitations of Walras's Law

In practice, observations have not matched Walras's theory in many cases. Even if "all other markets" were in equilibrium, an excess of supply or demand in an observed market meant that it was not in equilibrium. Walras's law looks at markets as a whole rather than individually.

Economists who studied and built on Walras's law hypothesized that the challenge of quantifying units of so-called "utility," a subjective concept, made it difficult to formulate the law in mathematical equations, which Walras wanted to do. Measuring utility for each individual, not to mention aggregating across a population to form a utility function, was not a practical exercise, critics of Walras's law argued. According to them, if this could not be done, the law would not hold, because utility influences demand.

Available at https://www.investopedia.com/terms/w/walras-law.asp (Acceso 16 de julio, 2024)

 1.   1. ¿Quién es el economista francés al que se le atribuye la creación de la teoría del equilibrio general?

2.  2. ¿Cuál es el título del libro en el que se encuentran los conocimientos más importantes de Walras?

3.     3. ¿En qué año se publicó el libro "Elements of Pure Economics"?

4.    4. ¿Qué economistas, además de Léon Walras, son considerados padres fundadores de la economía neoclásica?

5.    5. ¿Qué asume la ley de Walras sobre el papel de la "mano invisible" en los mercados?

6.   6. ¿Cómo se espera que los productores respondan a los cambios en las tasas de interés según la ley de Walras?

7.  7. ¿Cuáles son las dos suposiciones fundamentales que Walras hace sobre el comportamiento de los consumidores y las empresas?

8.    8. ¿Cuál es una de las limitaciones prácticas de la ley de Walras mencionada en el texto?

9.     9. ¿Cómo se comportan los mercados en la teoría de Walras cuando hay exceso de demanda?

10. 10. ¿Qué dificultad mencionan los críticos de la ley de Walras en relación con la medición de la "utilidad"?