=Consider the exchange economy from the class. There are two consumers and two goods.Suppose that u(x₁,×2) = x₁ * x² is the utility function of the first consumer and v(x1,x2) =2x1 + x2 is the utility function of the second consumer. Suppose that w₁ (1,2) is theendowment of the first consumer and w2 = (2,3) is the endowment of the second consumer.=1. Draw the Edgeworth box for this economy and denote where the initial endowment is.Determine whether the initial endowment is a Pareto efficient allocation.2.3. Find the contract curve.4. Find the set of allocations that Pareto improve upon the initial endowment.5. Find the core.

When a set of allocations is such that the utility derived from it for one consumer cannot be…

= Consider the exchange economy from the class. There are two consumers and two goods. Suppose that u(x1, x2) = x₁ * x is the utility function of the first consumer and v(x1, x2): 2x1 + x2 is the utility function of the second consumer. Suppose that w₁ = (1,2) is the endowment of the first consumer and W2 = (2,3) is the endowment of the second consumer. 1. 2. Draw the Edgeworth box for this economy and denote where the initial endowment is. Determine whether the initial endowment is a Pareto efficient allocation. 3. Find the contract curve. 4. Find the set of allocations that Pareto improve upon the initial endowment. 5. Find the core.

= Consider the exchange economy from the class. There are two consumers and two goods. Suppose that u(x1, x2) = x₁ * x is the utility function of the first consumer and v(x1, x2): 2x1 + x2 is the utility function of the second consumer. Suppose that w₁ = (1,2) is the endowment of the first consumer and W2 = (2,3) is the endowment of the second consumer. 1. 2. Draw the Edgeworth box for this economy and denote where the initial endowment is. Determine whether the initial endowment is a Pareto efficient allocation. 3. Find the contract curve. 4. Find the set of allocations that Pareto improve upon the initial endowment. 5. Find the core.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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