9. Consider an Edgeworth box economy with two consumers, whose utility func-tions and endowments areu'(x},x}) = (x}Xx})}(5,5)In the following, use the normalization p2 = 1.(a) Find the competitive equilibrium price.(b) State the first fundamental theorem of welfare and verify that it holds inthis economy.(e) Consider the allocation ĩ = (x',) = (2,3), (8, 7). Show whether this allo-cation can supported as an equilibrium with transfers.(d) State the second fundamental theorem of welfare, and briefly discuss whetherthe result in part (c) conform with or violate this theorem.3.

Competitive equilibrium is a condition where profit-boosting makers and utility-expanding shoppers…

9. Consider an Edgeworth box economy with two consumers, whose utility fune- tions and endowments are u'cx.) = (x}Xx}»! =(5,5) In the following, use the normalization p2 =1. (a) Find the competitive equilibrium price. (b) State the first fundamental theorem of welfare and verify that it holds in this economy. (c) Consider the allocation = (2',)= (2,3), (8,7). Show whether this allo- cation can supported as an equilibrium with transfers.

9. Consider an Edgeworth box economy with two consumers, whose utility fune- tions and endowments are u'cx.) = (x}Xx}»! =(5,5) In the following, use the normalization p2 =1. (a) Find the competitive equilibrium price. (b) State the first fundamental theorem of welfare and verify that it holds in this economy. (c) Consider the allocation = (2',)= (2,3), (8,7). Show whether this allo- cation can supported as an equilibrium with transfers.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter6: Demand Relationships Among Goods

Section: Chapter Questions

Problem 6.9P

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