we have two consumers Ava and Ben, this time with preferences: UA = min(2x, x2) and...
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we have two consumers Ava and Ben, this time with preferences: UA = min(2x₁, x2) and U³ = x² + x² Total endowments are E₁ E₂ = 10. The initial endowment is at ef = e = 4, ef = e² = 6 a. Draw the Edgeworth box in the graph below on the left. Mark the initial endowment allocation, and draw the indifference curves that pass through it. Is the endowment allocation Pareto efficient? Explain. b. d. Now suppose prices in the market are P₁ = 2, P₂ = 1. In the graph on the right, draw the Edgeworth box again, with the same endowment point, and add the budget line suggested by these prices. Label the intersections. a. and b. OB x₁=1 OB Good 2 0A Draw the contract curve. Does it contain both origin points? Explain. -10 Good 1 e co contract curve Good 2 C. Ava's optimal choice (x1=3,x4-6) e Ben's optimal bundle when=2(x=4, x2 =10) P₂ 10 0A Good 1 Is there a competitive equilibrium on this budget line (that is, for this endowment and these prices)? Explain. we have two consumers Ava and Ben, this time with preferences: UA = min(2x₁, x2) and U³ = x² + x² Total endowments are E₁ E₂ = 10. The initial endowment is at ef = e = 4, ef = e² = 6 a. Draw the Edgeworth box in the graph below on the left. Mark the initial endowment allocation, and draw the indifference curves that pass through it. Is the endowment allocation Pareto efficient? Explain. b. d. Now suppose prices in the market are P₁ = 2, P₂ = 1. In the graph on the right, draw the Edgeworth box again, with the same endowment point, and add the budget line suggested by these prices. Label the intersections. a. and b. OB x₁=1 OB Good 2 0A Draw the contract curve. Does it contain both origin points? Explain. -10 Good 1 e co contract curve Good 2 C. Ava's optimal choice (x1=3,x4-6) e Ben's optimal bundle when=2(x=4, x2 =10) P₂ 10 0A Good 1 Is there a competitive equilibrium on this budget line (that is, for this endowment and these prices)? Explain.
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Answer rating: 100% (QA)
Solutions Step 1 c The budget line for consumer A is given as p1x1 A p2x2 A p1e1 A p2e2 A Assuming t... View the full answer
Related Book For
Fundamentals Of Thermodynamics
ISBN: 9781118131992
8th Edition
Authors: Claus Borgnakke, Richard E. Sonntag
Posted Date:
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