A small exchange economy is comprised of two of individuals, A and B, and two types of goods, x, ,x,. The individuals' preferences over two goods are can be represented by the following utility functions: U“(x, , x,) = min (2x, ,x, ) and U* (x, ,x, ) = min (x,,2.x,). Initial endowments are 10 x, (individual A), and 10 x, (individual B). Calculate the price ratio which yields an equilibrium in the exchange market.

A small exchange economy is comprised of two of individuals, A and B, and two types of goods, x, ,x,. The individuals' preferences over two goods are can be represented by the following utility functions: U“(x, , x,) = min (2x, ,x, ) and U* (x, ,x, ) = min (x,,2.x,). Initial endowments are 10 x, (individual A), and 10 x, (individual B). Calculate the price ratio which yields an equilibrium in the exchange market.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter13: General Equilibrium And Welfare

Section: Chapter Questions

Problem 13.6P

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