Mathematics, 22.02.2021 18:40 AlexS11
Consider an exchange economy with two people, A and B, and two commodities, food (x) and water (y). A's and B's preferences are described, respectively, by the following utility functions:
ua(Xa, Ya)= X^2aYa, MRSa(Xa, Ya)=2Ya/Xa
ub(Xb, Yb)=XbY^2b, MRSb(Xb, Yb)=Yb/2Xb
Suppose there are 6 units of x and 6 units of y overall.
1. Draw an Edgeworth box for this economy.
2. Determine whether each of the following allocations is (i) feasible, (ii) Pareto efficient
a. ( (2,4), (4,2) )
b. ( (4,2), (2,4) )
c. ( ( 8 / 3 , 1 ), ( 10/3 , 5 ) )
Answers: 1
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Consider an exchange economy with two people, A and B, and two commodities, food (x) and water (y)....
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