3. Consider a pure exchange economy with two consumers. Consumer 1 is Donald and consumer 2 is Vladimir. There are two goods [burgers I and caviar y]. Each consumer’s initial

3. Consider a pure exchange economy with two consumers. Consumer 1 is Donald and consumer 2
is Vladimir. There are two goods [burgers I and caviar y]. Each consumer’s initial endowments consist of 1 unit of each good. Consumer 1’s utility function is uflzhyl] = 3:1 +y1, while consumer 2’s is H2(532, y2) = 532 + 215. (a) Represent this economy [preferences and initial endowments] in the Edgeworth box. (b) Find graphically the Pareto eflicient allocations in the Edgworth box. Is the initial endowments
point Pareto eflicient? “Thy? ‘Why not? (c) Draw the two ofi’er curves, one for each consumer. Using them, calculate the competitive
equilibrium of this pure exchange economy. You should indicate final consumption of each
agent and the equilibrium prices (remember that you can normalize the price of one good to
be 1, pg = 1 for example]. nt: a competitive equilibrium allocation can always be found as an intersection —difierent from the endowment— of the offer curves.

Do you need us to help you on this or any other assignment?


Make an Order Now
0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *