DSE 2011 Question 46: General equilibrium and exchange economies
Setup, from Q45 of the paper:
Consider an exchange economy with two agents, 1 and 2, and two goods, X and Y. There are 6 units of X and 4 units of Y available. An allocation is (x1,y1),(x2,y2) with x1+x2=6 and y1+y2=4. Agent 1 has utility u1=min{x1,y1} and agent 2 has u2=min{x2,y2}. Which of the following allocations is not Pareto efficient?
Consider an exchange economy with two agents and two goods; the agents have the same Leontief preferences min{x,y} as in the previous question. Agent 1's endowment is (0,α) and agent 2's endowment is (β,0). What is generally true?
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Setup, from Q45 of the paper: Consider an exchange economy with two agents, 1 and 2, and two goods, X and Y. There are 6 units of X and 4 units of Y available. An allocation is (x₁,y₁),(x₂,y₂) with x₁+x₂=6 and y₁+y₂=4. Agent 1 has utility u₁=min {x₁,y₁} and agent 2 has u₂=min {x₂,y₂}. Which of the following allocations is not Pareto efficient? Consider an exchange economy with two agents and two goods; the agents have the same Leontief preferences min {x,y} as in the previous question. Agent 1's endowment is (0,α) and agent 2's endowment is (β,0). What is generally true? (A) Any allocation in which each agent gets equal amounts of the two goods is an equilibrium allocation. (B) If β<α, then the price of X is 0. (C) If β>α, then the price of X is 0. (D) Any allocation in which agent 2 gets none of good Y is an equilibrium allocation.
Also written as: Setup, from Q45 of the paper: Consider an exchange economy with two agents, 1 and 2, and two goods, X and Y. There are 6 units of X and 4 units of Y available. An allocation is (x_1,y_1),(x_2,y_2) with x_1+x_2=6 and y_1+y_2=4. Agent 1 has utility u_1=min {x_1,y_1} and agent 2 has u_2=min {x_2,y_2}. Which of the following allocations is not Pareto efficient? Consider an exchange economy with two agents and two goods; the agents have the same Leontief preferences min {x,y} as in the previous question. Agent 1's endowment is (0,alpha) and agent 2's endowment is (beta,0). What is generally true?
General equilibrium and exchange economies has come up 69 times in 7 exams since 2004.
What this question tests
This question is on Walras' law, numeraire and relative prices, part of General equilibrium and exchange economies in Microeconomics.
Why one market clears automatically when the others do, and why only relative prices matter.
TestStop has 19 past-paper questions on this subtopic; the nearest in year are below.
