_. \\\"\" I" ...... j ...v.... ug-.......-..-........._. -n... 0...\"... Consider an exchange economy with two consumers, A and B, and two goods, 1 and 2. 0 Consumer A's initial endowment is MA = (Mimi) = (5. 9) and consumer B's endowment is mg = (Lula. wZB) = (5. 3). c Consumer A's consumption is IA = ($11.13;) and consumer B's consumption is .173 = (1)1313?) o Prices are ph-pg. They will be determined endogenously. Both consumers take prices as given. . . . 2 . . . 0 Consumer A's ut1l1ty 1s 15,; (I14. xi) = (-17.14) If; Consumer B's utility is LLB (2:3. 3:23) = 2 (a) . a) (4 points) Trite conditions on feasable allocations of 1'14 2:119 and 3:24 3:23 given the initial endowments. (Assume consumers consume all available resources. b) (4 points) Draw an Edgeworth box representing the total resources available to both consumers and the initial endowment ( note it to). Make it sufciently large as many other things will be drawn. And of course Always label your axes c) (6 points) Find the contract curve: all the Pareto-optimal allocations. Use the condi- tions on feasable allocations computed in a) to substitute 3.7%. 3:23 and express the curve as Ii as function of 17114. Draw it on your graph. To make sure it is drawn accurately. compute I; on the curve at 3:11 = 0.3.114 = 4.33114 = 333.1%; = 8133.14 = 12. d) (6 points) Find consumer A's demands as function of his initial endowment and the prices: .1711 (p1,p2.wh.wi), If; @1,pg,w.wi). Substitute the numerical values of the initial endowment will. UJE'. e) 6 points) 'What are consumer A's demands (3534,3331) if the relative prices are 3; = 1. I7; = 2, :21 = 3? Use them to represent on your graph consumer A's price-offer curve