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Consider a pure exchange economy with two traders, Sam and Diane, and two goods, G and H. Sam's utility function is US=GS2 HS while Diane's
Consider a pure exchange economy with two traders, Sam and Diane, and two goods, G and H. Sam's utility function is US=GS2 HS while Diane's utility function is UD=GDHD. Together, Sam and Diane own 50 units of G and 150 units of H which are initially divided equally between them. a) Calculate MRS of G for H for both the consumers. b) Find the efficient point, that is, utility maximization point for both consumers. Also using the resource constraints find the equation of HS in terms of GS. (This is the equation of set of Pareto efficient points-Contract Curve). c) Find the competitive equilibrium of this economy using initial endowment points
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