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4. Suppose a pure exchange economy with two people (a,b) and two goods (1,2). The utility function of person a is u = (z)(z%), and
4. Suppose a pure exchange economy with two people (a,b) and two goods (1,2). The utility function of person a is u = (z)(z%), and person b's utility is u* = (28)(z5)?. Also, w* = (5,2) and w = (5, 8). (a) Use good 1 as numeraire and find the Walras equilibrium price. (b) Based on (a), find the Walras equilibrium allocations. (c) Based on (b), find the M RS and MRS at the equilibrium allocations. ) (d) Explain why the equilibrium allocations in (b) are also Pareto efficient (not asked in Canvas)
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