Skip to content
We use only essential cookies to keep you signed in and remember your preferences. See our Cookie Policy.
TestStop
MocksPracticeResourcesIndiaBlogPricing
Sign in
Questions › DSE › DSE 2020 › Q25
4 marks, −1Microeconomics › General equilibrium and exchange economies › Existence and non-existence of equilibriumModerateabout 3 min

DSE 2020 Question 25: General equilibrium and exchange economies

An exchange economy has agents 1,21,21,2 and goods x,yx,yx,y. Agent 111 lexicographically prefers xxx to yyy; agent 222's utility is u2(x,y)=x+yu_2(x,y)=x+yu2​(x,y)=x+y. Endowments are (ωx1,ωy1)=(0,10)(\omega^1_x,\omega^1_y)=(0,10)(ωx1​,ωy1​)=(0,10) and (ωx2,ωy2)=(10,0)(\omega^2_x,\omega^2_y)=(10,0)(ωx2​,ωy2​)=(10,0). The set of competitive equilibrium price ratios px/pyp_x/p_ypx​/py​ is

Tap an option to check your answer.

Answer and worked solution

Checking your account…

Plain-text version

An exchange economy has agents 1,2 and goods x,y. Agent 1 lexicographically prefers x to y; agent 2 's utility is u₂(x,y)=x+y. Endowments are (ω¹ₓ,ω¹_y)=(0,10) and (ω²ₓ,ω²_y)=(10,0). The set of competitive equilibrium price ratios pₓ/p_y is (A) {1} (B) [0,1] (C) (0,1] (D) ∅

Also written as: An exchange economy has agents 1,2 and goods x,y. Agent 1 lexicographically prefers x to y; agent 2 's utility is u_2(x,y)=x+y. Endowments are (omega^1_x,omega^1_y)=(0,10) and (omega^2_x,omega^2_y)=(10,0). The set of competitive equilibrium price ratios p_x/p_y is

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.

TestStop has 13 past-paper questions on this subtopic.

Practise General equilibrium and exchange economiesMore on Existence and non-existence of equilibrium

Similar questions from other papers

  • CUET-PG 2026 · Q2_ Curve shows the all efficient allocation of goods between two consumers, or of two inputs between two production functions.
  • IIT JAM 2026 · Q6Which one of the following statements is CORRECT for the general equilibrium analysis for a two-person and two-good pure exchange economy?
  • GATE 2025 · Q58Consider a two-person exchange economy where two goods, x and y are available in limited quantities of 50 and 100, respectively. The preferences of the two persons…
  • CUET-PG 2024 · Q18In a 2x2 general equilibrium model of exchange with goods X and Y and two consumers 1 and 2, both of whom have a weakly positive endowment of X and Y, in the exchange…
  • GATE 2024 · Q46Consider a two good economy where a denotes consumption of apricots and b denotes consumption of bananas. Anu's utility function is U^(Anu)(a,b) = a+2b, and Binu's…

Question from the DSE 2020 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.