6. In an Edgeworth box for two consumers, A and B, with endowments of = commodities Xa and d Ya are A's endowments, Xb and Yb are B's, and Xo = Xa + Xb, Yo Ya + Yb), the competitive equilibrium allocation of the two commodities represents a mutual tangency of both consumers' indifference curves with each other and with a common budget line. (a) The conditions require that A and B consume at a point on their budget lines where their indifference curves have the same marginal rate of substitution. and equilibrium for the market as a whole requires that the sum of the individuals' demands for each commodity must equal the totals (Xo and Yo) available. Mathematically express the point of equilibrium, that is, express the above statement with equations in relating each endowments, equilibrium points (Xa, Xb, Ya, Yb), and totals ((Xo, Yo).
6. In an Edgeworth box for two consumers, A and B, with endowments of = commodities Xa and d Ya are A's endowments, Xb and Yb are B's, and Xo = Xa + Xb, Yo Ya + Yb), the competitive equilibrium allocation of the two commodities represents a mutual tangency of both consumers' indifference curves with each other and with a common budget line. (a) The conditions require that A and B consume at a point on their budget lines where their indifference curves have the same marginal rate of substitution. and equilibrium for the market as a whole requires that the sum of the individuals' demands for each commodity must equal the totals (Xo and Yo) available. Mathematically express the point of equilibrium, that is, express the above statement with equations in relating each endowments, equilibrium points (Xa, Xb, Ya, Yb), and totals ((Xo, Yo).
Chapter13: General Equilibrium And Welfare
Section: Chapter Questions
Problem 13.13P
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