Introduction

In this chapter we study economies with nontrivial production possibilities. The notions of equilibrium and regular equilibrium will be defined and the corresponding index theorem established.

Most of the analysis and results of the previous chapter could be generalized without much difficulty to cover the production case. It would, however, be pointless, not to say dull, to devote this chapter to doing so in detail. Hence, we shall limit ourselves to present the basic concepts and dwell only on those aspects that are specific to the presence of production.

Definitions of production economy, equilibrium, regular equilibrium, and index are presented in Sections 6.2 and 6.3. Section 6.4 is devoted to the special important case of constant returns economies. The index relation for production economies is stated and proved in Section 6.5. Section 6.6. parallels Section 5.7 and spells out the implications of production for the uniqueness of equilibrium. The point will be made that to get the latter the presence of production is helpful and definitely not a complicating factor.