Consider an Edgeworth Economy with two consumers A and B, and two goods 1 and 2....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Consider an Edgeworth Economy with two consumers A and B, and two goods 1 and 2. The initial endowments are E₁ = 6 and E₂ = 6, and the initial endowments are |e4 = 6, e4 = 0, e² = 0, and e² = 6. In words, A holds the entire endowment of good 1, and B holds the entire endowment of good 2. u²(x₁, x₂) = x1x2, and the utility function of consumer B is u³ (y₁, 92) = √₁ + √√2- (a) Draw the Edgeworth Box that shows the initial endowments on it. P2 = (b) Verify that the price ratio ₁ = 1 and x₁ = x₂ = y₁ = y₂ = 3 is an equilibrium. Hint: You do not need to derive the equilibrium from scratch. You can just show that given the price ratio 1, both consumers maximize utility when consuming 3 units of each good, and that this allocation is feasible. Alternatively, you can just show that the allocation satisfies the MRSA = MRSB and the feasibility conditions. P2 Consider an Edgeworth Economy with two consumers A and B, and two goods 1 and 2. The initial endowments are E₁ = 6 and E₂ = 6, and the initial endowments are |e4 = 6, e4 = 0, e² = 0, and e² = 6. In words, A holds the entire endowment of good 1, and B holds the entire endowment of good 2. u²(x₁, x₂) = x1x2, and the utility function of consumer B is u³ (y₁, 92) = √₁ + √√2- (a) Draw the Edgeworth Box that shows the initial endowments on it. P2 = (b) Verify that the price ratio ₁ = 1 and x₁ = x₂ = y₁ = y₂ = 3 is an equilibrium. Hint: You do not need to derive the equilibrium from scratch. You can just show that given the price ratio 1, both consumers maximize utility when consuming 3 units of each good, and that this allocation is feasible. Alternatively, you can just show that the allocation satisfies the MRSA = MRSB and the feasibility conditions. P2
Expert Answer:
Answer rating: 100% (QA)
a The Edgeworth box with the initial endowments is httpsip... View the full answer
Related Book For
Posted Date:
Students also viewed these economics questions
-
Case Study: Quick Fix Dental Practice Technology requirements Application must be built using Visual Studio 2019 or Visual Studio 2017, professional or enterprise. The community edition is not...
-
List three specific parts of the Case Guide, Objectives and Strategy Section (See below) that you had the most difficulty understanding. Describe your current understanding of these parts. Provide...
-
From a management perspective, formulate and explain your company's offensive or defensive strategy to improve its market position in the next 3 years. Explain whether your company will be a first...
-
Ava bought a house on 1 July 2000 for 62,000. She occupied the entire property as her PPR until 1 August 2007 when she began using one-quarter of the house for business purposes. This continued until...
-
Two vectors have unequal magnitudes. Can their sum be zero? Explain.
-
Nine subjects were used in an experiment to determine if an atmosphere involving exposure to carbon monoxide has an impact on breathing capability. The data were collected by personnel in the Health...
-
What is eco-efficiency? How is it measured? Why is it measured? Where is it reported?
-
MULTIPLE-CHOICE QUESTIONS 1. Which of the following is not a reason that audit firms continue to experience high levels of litigation? a. Joint and several liability statutes. b. Class action...
-
1. Derive Freudensteins equation for a four bar linkage. 2. A four-link mechanism has the dimensions as: a = 1.5 cm, b= 4.5 cm, c=4.5 cm and d = 6.0 cm. Draw the limit positions. a=1.50 b=4.5 d=6...
-
A winery has the following capacity to produce an exclusive dinner wine at either of its two vineyards at the indicated costs: Four Italian restaurants around the country are interested in purchasing...
-
The journal entry to close salaries expense includes a ______ account. Multiple select question. debit to the salaries expense credit to the salaries expense credit to the retained earnings debit to...
-
What is a stack?
-
What is the advantage of the heap over a stack?
-
Differentiate between the void pointer, NULL pointer and an uninitialized pointer.
-
How to avoid dangling pointer issues and memory leakage problem?
-
Write an algorithm and C code for deleting any node from the singly linear linked list.
-
The trial balance of Kroeger Inc. included the following accounts as of December 31, 2019: Debits Credits Sales revenue: $8,200,000 Interest revenue: 60,000 Gain on sale of investments: 120,000...
-
A bar of a steel alloy that exhibits the stress-strain behavior shown in Figure 6.22 is subjected to a tensile load; the specimen is 375 mm (14.8 in.) long and has a square cross section 5.5 mm (0.22...
-
The price elasticity of demand for oatmeal is constant and equal to 1. When the price of oatmeal is $10 per unit, the total amount demanded is 6,000 units. (a) Write an equation for the demand...
-
Assuming that the Capital Asset Pricing Model is valid, complete the following table. In this table p0 is the current price of asset I and Ep1 is the expected price of asset i in the next period.
-
The horn of the rhinoceros is prized in Japan and China for its alleged aphrodisiac properties. This has proved to be most unfortunate for the rhinoceroses of East Africa. Although it is illegal to...
-
What are the responsibilities of the governments toward the stateless? Do the United States and other powerful nations have responsibilities toward groups such as the Rohingya? Following the...
-
The United States and Canada are two of only 33 countries that have jus soli, the right to citizenship of any individual born on their soil. Why do you think this right is so limited, and do you...
-
What are stratified societies and what kinds of social systems are they identified with?
Study smarter with the SolutionInn App