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Problem 2 Consider a two-period finance economy, (UA, UB, WA, WB, R), where there are two possible states of the world, two individuals(A and
Problem 2 Consider a two-period finance economy, (UA, UB, WA, WB, R), where there are two possible states of the world, two individuals(A and B) and only one commodity. Let R = (69) be the asset structure and let U(x) = x0+ In + In 2 (i = A, B) be the preferences. Suppose (1,4,2) and w = (1,2,4). 2 (a) Find the financial market equilibrium (both prices and allocations) for this economy. (b) Now suppose that the asset structure is = equilibrium (both prices and allocations) for this economy. Find the financial market
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