. Consider a 2 2 pure exchange economy with two consumers, Andy and Beth, or {A, B}, and two goods {1, 2}. Andy has endowment e A = (4, 2) and Beth has endowment e B = (2, 2). Andy's preferences can be represented by the utility function uA = xA1 + xA2 and Beth's preferences can be represented by the utility function uB = xB1xB2. Let prices be (p1, p2) = (1, 2). (a) Sketch an Edgeworth box showing the dimensions, initial endowment, both players' indifference curves through the initial endowment and budget sets. (5 marks) (b) Find consumers' optimal demands at prices (p1, p2) = (1, 2) and show that Walras' Law holds at these prices. (5 marks) (c) Find the Pareto Set (you may either describe it mathematically or illustrate it on an Edgeworth box). (4 marks) (d) Without calculating the Walrasian Equilibrium, say how equilibrium prices compare to (p1, p2) = (1, 2). Then using the First Welfare Theorem or otherwise find the Walrasian Equilibrium allocation and prices.

in Dashboard X W EC202: Microeconomics 2 x ec2020_may_2022.pdf X wild Academic Homepage - Aca x W Microsoft Word - Statistical X *Homework Help - Q&A from X + V X -> C a warwick.ac.uk/services/exampapers/ec/ec2020_may_2022.pdf S Update : E ec2020_may_2022.pdf 3/ 6 - 100% + EC2020 3. Consider a 2 x 2 pure exchange economy with two consumers, Andy and Beth, or { A, B}, and two goods {1, 2}. Andy has endowment ed = (4, 2) and Beth has endowment eB = (2, 2). Andy's preferences can be represented by the utility function uA = TAI + TA2 and Beth's preferences can be represented by the utility function us = TB1TB2. Let prices be (P1, P2) = (1, 2). (a) Sketch an Edgeworth box showing the dimensions, initial endowment, both players' indifference curves through the initial endowment and budget sets. (5 marks) (b) Find consumers' optimal demands at prices (P1, P2) = (1, 2) and show that Walras' Law holds at these prices. (5 marks) (c) Find the Pareto Set (you may either describe it mathematically or illustrate it on an Edgeworth box). (4 marks) 2 (d) Without calculating the Walrasian Equilibrium, say how equilibrium prices compare to P1, P2) = (1, 2). Then using the First Welfare Theorem or otherwise find the Walrasian Equilibrium allocation and prices. (4 marks) 4. (a) The First Welfare Theorem for pure exchange economies can be stated as "If there are no externalities and everyone has locally non-satiated preferences, then every Walrasian Equilibrium is Pareto efficient." Take the contrapositive of this statement. What can we say about an economy where everyone has locally non-satiated preferences and which has a Walrasian Equilibrium which is not Pareto efficient? (3 marks) 3 (b) Consider a 2 x 2 pure exchange economy with two consumers, Andy and Beth, or { A, B}, and two goods {1, 2}. Andy has endowment ed = (1, 1) and Beth has endowment e = (1, 1). Andy's preferences can be represented by the utility function UA = TAIT 42 and Beth's preferences can be represented by the utility function UB = BITB2 + 41. Notice that Andy's consumption of good 1 creates a positive externality for Beth. Show that there is a Walrasian Equilibrium at the initial : 13.C 19:19 Rain coming Search 30/03/2023