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Consider the economy with 2 agents, Adam (A) and Bess(B) with the following preferences over 2 goods, x and y. Assume that Adam has 12
Consider the economy with 2 agents, Adam (A) and Bess(B) with the following preferences over 2 goods, x and y. Assume that Adam has 12 units of good y, and Bess has 12 units of good x. Their utility functions are as follows:
uA(xA,yA)=min{xA,2yA}
uB(xB,yB)=min{4xB,2yB}
-Assume that the market of good x booms. Now, Bess has 24 units of good x. Show that markets CANNOT be cleared for any price. (Hint: It is easy to show by using Edgeworth Box)
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