A pure exchange economy has three persons and goods , with utilities , , . If the endowments are respectively, then
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2 marks, −0.666666666666667MicroeconomicsGeneral equilibrium and exchange economiesCompetitive equilibrium in an exchange economyHardabout 4 min
DSE 2015 Question 21: General equilibrium and exchange economies
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A pure exchange economy has three persons 1,2,3 and goods x,y, with utilities u¹=xy, u²=x³y, u³=xy². If the endowments are (2,0),(0,12),(12,0) respectively, then (A) an equilibrium price ratio does not exist (B) p_X/p_Y=1 is an equilibrium price ratio (C) p_X/p_Y>1 is an equilibrium price ratio (D) p_X/p_Y<1 is an equilibrium price ratio
Also written as: A pure exchange economy has three persons 1,2,3 and goods x,y, with utilities u^1=xy, u^2=x^3y, u^3=xy^2. If the endowments are (2,0),(0,12),(12,0) respectively, then
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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