Consider an exchange economy with two persons and two goods. Person 1's utility is and person 2's is . Person 1's endowment is and person 2's is . Denote person 1's allocation by and person 2's by . The set of efficient allocations is such that
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Consider an exchange economy with two persons and two goods. Person 1's utility is u₁(x,y)=x+y and person 2's is u₂(x,y)=e^(x²+y²+2xy). Person 1's endowment is (1,0) and person 2's is (0,1). Denote person 1's allocation by (x₁,y₁) and person 2's by (x₂,y₂). The set of efficient allocations is such that (A) (x₂,y₂)=(1-x₁,1-y₁) for all x₁,y₁∈[0,1] (B) (x₂,y₂)=(1-x₁,1-y₁) for all x₁,x₂∈(0,1) (C) (x₁,y₁)=(1/2,1/2)=(x₂,y₂) (D) (x₁,y₁)=(e^a,e^b) and (x₂,y₂)=(1-e^a,1-e^b) for all a,b∈(-∞,0)
Also written as: Consider an exchange economy with two persons and two goods. Person 1's utility is u_1(x,y)=x+y and person 2's is u_2(x,y)=e^(x^2+y^2+2xy). Person 1's endowment is (1,0) and person 2's is (0,1). Denote person 1's allocation by (x_1,y_1) and person 2's by (x_2,y_2). The set of efficient allocations is such that
General equilibrium and exchange economies has come up 69 times in 7 exams since 2004.
This question is on Edgeworth box and the contract curve, part of General equilibrium and exchange economies in Microeconomics.
The geometry of trade between two consumers and the set of efficient allocations.
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Question from the DSE 2008 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.