Consider a pure exchange economy with two goods k = 1,2 and two householdsi = A, B. The total available amount of good 1 and 2 is 9 and 12 units, respectively.Utility functions for households A and B areUA (TA1, A2) = TA1TA2 and UB(B1, B2) = XB1T32.(a) Find an expression for the Pareto optimal set.(b) Assume e A = (4,4) and eg (5,8) are A and B endowments, respectively. Findthe competitive equilibrium.(c) Is the competitive equilibrium allocation in the Pareto Optimal set? Why thisresult should not surprise us?

The two goods in the economy is given as The total amount of good 1 available is 9 units.The total…

Consider a pure exchange economy with two goods k = 1,2 and two households i A, B. The total available amount of good 1 and 2 is 9 and 12 units, respectively. Utility functions for households A and B are UA (TA1, A2) = TAITA2 and UB(B1, B2) = XB1³2. (a) Find an expression for the Pareto optimal set. (b) Assume e A = (4, 4) and eg = (5,8) are A and B endowments, respectively. Find the competitive equilibrium. (c) Is the competitive equilibrium allocation in the Pareto Optimal set? Why this result should not surprise us?

Consider a pure exchange economy with two goods k = 1,2 and two households i A, B. The total available amount of good 1 and 2 is 9 and 12 units, respectively. Utility functions for households A and B are UA (TA1, A2) = TAITA2 and UB(B1, B2) = XB1³2. (a) Find an expression for the Pareto optimal set. (b) Assume e A = (4, 4) and eg = (5,8) are A and B endowments, respectively. Find the competitive equilibrium. (c) Is the competitive equilibrium allocation in the Pareto Optimal set? Why this result should not surprise us?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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