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Walras' Law (Market Value) Calculator

Calculates the value of excess demand for a single market, a component of Walras' Law.

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Result
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Price of Good i

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Overview

Walras' Law states that in a general equilibrium model, the sum of the values of excess demands across all markets must be zero. This calculator focuses on computing the value of excess demand () for a specific market , which is a fundamental building block for understanding the overall market equilibrium condition. It helps in analyzing individual market contributions to the aggregate excess demand.

Symbols

Variables

= Price of Good i, = Excess Demand for Good i, = Value of Excess Demand

Price of Good i
$
Excess Demand for Good i
units
Value of Excess Demand
$

Apply it well

When To Use

When to use: Use this to calculate the monetary value of excess demand (or supply) for a single good or service. This is useful when analyzing individual market imbalances that contribute to the overall Walras' Law identity. It helps in understanding how price and excess demand interact to create market value.

Why it matters: Understanding the value of excess demand for individual markets is crucial for microeconomic analysis and for verifying Walras' Law in multi-market models. It highlights how market prices and quantities interact to determine market states, informing policy decisions related to market interventions and stability.

Avoid these traps

Common Mistakes

  • Confusing excess demand () with total demand or total supply.
  • Incorrectly interpreting a negative value of as excess demand (it means excess supply).

One free problem

Practice Problem

In the market for good X, the price () is $) for good X.

Price of Good i25 $
Excess Demand for Good i150 units

Solve for: result

Hint: Multiply price by excess demand.

The full worked solution stays in the interactive walkthrough.

References

Sources

  1. Wikipedia: Walras's law
  2. Microeconomic Theory by Mas-Colell, Whinston, and Green
  3. Hal Varian, Microeconomic Analysis
  4. N. Gregory Mankiw, Principles of Economics
  5. Mas-Colell, Andreu, Michael D. Whinston, and Jerry R. Green. Microeconomic Theory. Oxford University Press, 1995.
  6. Mas-Colell, Whinston, Green - Microeconomic Theory, Chapter 17