Now suppose agent 1 lexicographically prefers to and agent 2 treats and as perfect complements. The set of competitive equilibrium allocations
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DSE 2010 Question 54: General equilibrium and exchange economies
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Now suppose agent 1 lexicographically prefers y to x and agent 2 treats x and y as perfect complements. The set of competitive equilibrium allocations (A) includes the allocation (1,0) for agent 1 and (1,1) for agent 2 (B) includes the allocation (0,1) for agent 1 and (2,0) for agent 2 (C) is empty (D) includes all allocations (x,1) for agent 1 and (2-x,0) for agent 2, where x∈[0,2]
General equilibrium and exchange economies has come up 69 times in 7 exams since 2004.
What this question tests
This question is on Existence and non-existence of equilibrium, part of General equilibrium and exchange economies in Microeconomics.
When a competitive equilibrium exists and the preferences that make it fail.
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