Consider a economy with three goods, a, b and c. The total supply consists 150a, 180b and 120c. There are three consumers 1,2,3 They have the followiing preferences: u1(a,b,c)=a u2(a,b,c)=a+b u3(a,b,c)=1+c a) Identify a competitive equilibrium from euqal incomes in which the price of a and c are equal. b) Find the egalitarian equivalent allocation(EEA is one that gives each agent the same utility as giving the one a fraction x of total supply, for x as large as possible)
Consider a economy with three goods, a, b and c. The total supply consists 150a, 180b and 120c. There are three consumers 1,2,3 They have the followiing preferences: u1(a,b,c)=a u2(a,b,c)=a+b u3(a,b,c)=1+c a) Identify a competitive equilibrium from euqal incomes in which the price of a and c are equal. b) Find the egalitarian equivalent allocation(EEA is one that gives each agent the same utility as giving the one a fraction x of total supply, for x as large as possible)
Chapter4: Prices: Free, Controlled, And Relative
Section: Chapter Questions
Problem 2WNG
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Consider a economy with three goods, a, b and c. The total supply consists 150a, 180b and 120c. There are three consumers 1,2,3 They have the followiing preferences:
u1(a,b,c)=a
u2(a,b,c)=a+b
u3(a,b,c)=1+c
a) Identify a competitive equilibrium from euqal incomes in which the price of a and c are equal.
b) Find the egalitarian equivalent allocation(EEA is one that gives each agent the same utility as giving the one a fraction x of total supply, for x as large as possible)
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