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The question on deriving Marshallian and Walsarian prices within a function with endownments. There e two consumers A and B with the following utility functions
The question on deriving Marshallian and Walsarian prices within a function with endownments.
There e two consumers A and B with the following utility functions and with uA + (l a) lnm, (O, tnin{EIB, ran), L'B , O). (a) Derie the demands Xi(p, m), i A, B. (5 (b) Calculate the market and the allocatims. (5 rn&ks) (c) Explain the Walrasian equil&ium price of good 1 varies with a {3. (5 marks) (d) Calculate the effect Of an increase in On the Of good l. (5 (e) In general. an allocation , ra, ...,fL) in an exchange ecmomy is said to be Pareto-efhcient if there does not exist feasible allocation , ) that: (i) udi,) uj(tl), all l; and (ii) u.(Xl) > ut(Xl), l. Prove that a Walrasian equilibrium allocation (x; , d) is P*eto-efficient. (5 mrks)
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