Consider a pure exchange economy with two individuals (A and B) and two goods (x and y).
The utility functions are given by UA(xA, yA) = min[xA, yA] UB(xB, yB) = min[xB, yB],
where xi and yi are the quantities of the two goods consumed by individual i = A, B. The total endowments are wx = 10 and wy = 5.
(a) Represent the indifference curves of both individuals in the Edgeworth box and find the Pareto set.
(b) Let the individual endowments be wA = (7, 2) and wB = (3, 3). Determine the equilibrium quantities and prices?
(c) What can we say about the equilibrium prices for other values of individual endowments?
Consider a pure exchange economy with two individuals (A and B) and two goods (x and...
Description of the economy: For each of the following problems, consider a 2x2 Exchange Economy with two consumers A and B, and two goods X and Y . The preferences of consumer A can be represented by the utility function uA(xA, yA) = xAyA , where xA is the amount of good A consumed by consumer A, and yA is the amount of good Y consumed by consumer A. The preferences of consumer B can be represented by the utility...
Description of the economy: For each of the following problems, consider a 2x2 Exchange Economy with two consumers A and B, and two goods X and Y . The preferences of consumer A can be represented by the utility function uA(xA, yA) = xAyA , where xA is the amount of good A consumed by consumer A, and yA is the amount of good Y consumed by consumer A. The preferences of consumer B can be represented by the utility...
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