For the exchange economy with Agent endowment , Agent endowment , and each maximizing : the set of all competitive equilibrium allocations consists of allocations of the form and where
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2 marks, −1MicroeconomicsGeneral equilibrium and exchange economiesCompetitive equilibrium in an exchange economyHardabout 3 min
DSE 2004 Question 6: General equilibrium and exchange economies
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For the exchange economy with Agent 1 endowment (999,0), Agent 2 endowment (0,1000), and each maximizing min {xᵢ,yᵢ}: the set of all competitive equilibrium allocations consists of allocations of the form (x₁,y₁) and (x₂,y₂)=(999-x₁, 1000-y₁) where (A) x₁=0 and y₁∈[0,1] (B) x₁=999 and y₁∈[999,1000] (C) x₁∈[0,999] and y₁∈[0,1000] (D) x₁=499 and y₁=500
Also written as: For the exchange economy with Agent 1 endowment (999,0), Agent 2 endowment (0,1000), and each maximizing min {x_i,y_i}: the set of all competitive equilibrium allocations consists of allocations of the form (x_1,y_1) and (x_2,y_2)=(999-x_1, 1000-y_1) where
General equilibrium and exchange economies has come up 69 times in 7 exams since 2004.
What this question tests
This question is on Competitive equilibrium in an exchange economy, part of General equilibrium and exchange economies in Microeconomics.
Finding the prices at which every consumer's chosen bundle clears the market.
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