An exchange economy has goods and agents with endowments and , and utilities and . The competitive equilibrium price ratio is
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An exchange economy has goods and agents with endowments and , and utilities and . The competitive equilibrium price ratio is
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An exchange economy has goods x,y and agents 1,2 with endowments (ω¹ₓ,ω¹_y)=(0,9) and (ω²ₓ,ω²_y)=(10,0), and utilities u₁(x,y)=min {x,y} and u₂(x,y)=min {x,y}. The competitive equilibrium price ratio pₓ/p_y is (A) 9/10 (B) 10/9 (C) 1 (D) 0
Also written as: An exchange economy has goods x,y and agents 1,2 with endowments (omega^1_x,omega^1_y)=(0,9) and (omega^2_x,omega^2_y)=(10,0), and utilities u_1(x,y)=min {x,y} and u_2(x,y)=min {x,y}. The competitive equilibrium price ratio p_x/p_y is
General equilibrium and exchange economies has come up 69 times in 7 exams since 2004.
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.
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Question from the DSE 2020 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.