General Equilibrium Models: Usefulness and Techniques of Application

Abstract

This chapter presents the essence of the simple general equilibrium techniques as developed and popularized by R. W. Jones in the simplest possible manner. It also discusses on extensions of the simple two-sector general equilibrium models, inclusion of non-traded goods, the techniques of measuring social welfare in a small open economy and its changes resulting from changes in policy parameters. All these give a thorough idea on how simple general equilibrium models can readily be used to analyse different complex problems pertaining to the developing world and to suggest remedial measures.