Past exam of the mathematics course of the University of Cambridge 2004 iii Paper 36 4 a Solution Created 2026-10-03 Updated 2026-10-14
Normalize the second price to one and write for the first price and for the varying endowment. Let be first-good aggregate excess demand. Under Walras law, the second excess-demand coordinate equals , so one market-clearing equation suffices. A regular exchange economy at fixed has at every equilibrium.
A sufficient joint condition is that zero be a regular value of the smooth map :To prove the almost-everywhere conclusion, the regular level set theorem makes a smooth one-dimensional manifold. Project to the parameter axis by . Its tangent space consists of vectors with . If , every is possible, so the derivative of is surjective. If , the joint condition gives , forcing ; the point is critical for .
Thus the parameters with a singular equilibrium are exactly the critical values of this projection. Sard theorem makes that set a null set. Therefore almost every parameter gives a regular economy. No claim of existence at every parameter is needed for this sufficient regularity criterion.
Past exam of the mathematics course of the University of Cambridge 2004 iii Paper 36 4 c Solution Created 2026-10-03 Updated 2026-10-14
When both consumers have the same quasilinear utility on , the same strictly concave one-variable maximization gives , independently of their wealth. If their first-good endowments are , thenThus the joint regular-value condition always holds. With positive total first-good endowment, the equilibrium isBoth first-good markets and second-good markets clear: second-good demands sum to . If a nonstandard endowment choice has , there is no positive-price zero, so the regular value condition is vacuous. In the usual positive-endowment case every parameter has the displayed unique regular exchange economy.