Consider a two-person, two-good economy (say, apples and bananas) without production. Both consumers have identical preferences, given by u(a,b)= a^0.2b^1-0.2, where a denotesthe consumption of apples, and b the consumption of bananas. Person1 owns 40 bananas and 20 apples, whereas person 2 owns 20 bananas and 40 apples.

and

For this question,refer back to the data from question 3.

Suppose the government of this economyadoptsaRawlsianapproach to welfare economics. That is, the socialwelfarefunction they adopt is as follows:

in file below...

Calculate the Socially Optimal allocation for this economy. Can such an allocation be achieved via re-distribution of the endowments?

QUESTION 3 20 points Saved Consider a two-person, two-good economy (say, apples and bananas) without production. Both consumers have identical preferences, given by u(a,b)= a0.2 b1-0.2, where a denotes the consumption of apples, and b the consumption of bananas. Person 1 owns 40 bananas and 20 apples, whereas person 2 owns 20 bananas and 40 apples. Calculate the equilibrium value of -for this economy (answer to two decimal places) P1 1.52 QUESTION 4 20 points Save Answer For this question, refer back to the data from question 3. Suppose the government of this economy adopts a Rawlsian approach to welfare economics. That is, the social welfare function they adopt is as follows: S(U1,U2)= min {u1,u2} Calculate the Socially Optimal allocation for this economy. Can such an allocation be achieved via re-distribution of the endowments? Attach File Browse My Computer