Answered step by step
Verified Expert Solution
Link Copied!

Question

...
1 Approved Answer

This economy has two agents A and B and two goods x and y. The utility functions are given by: U (33A,y'4) = ln (33)

image text in transcribed
This economy has two agents A and B and two goods x and y. The utility functions are given by: U (33A,y'4) = ln (33") + ln (31A) U($B,y3) = %1n(a:B) + lan) The endowments are given by (63,6?) = (4, 2) and (65,65) = (2, 4). 1. Draw the Edgeworth box and the endowment point. Make sure to label the length of each axis. Also, draw the indilference curve that goes through the endowment bundle for each agent. (Assume the indifference curves have the usual 'CobbDouglas' shape.) 2. Let p; = 1. Find the competitive equilibrium: (pg, p3) and {(3:*A, y\"), (z*B,y*B)}. Is this allocation Pareto eicient

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Elementary Statistics

Authors: Robert R. Johnson, Patricia J. Kuby

11th Edition

9780538733502

Students also viewed these Economics questions