The questions are attached in the image. The model for the question is given in the first image. Please answer 3 questions using the information in the given model.Please answer all the three question (4,6 and 7). Also, please provide a mathematical as well as intuitive solution for the questions. More specifically what will be the demand function for X look like when his preferences are lexicographic? Thank you. 6. Now suppose A lexicographically prefers y to x and B considers r and y to be perfectsubstitutes. The set of all possible competitive equilibrium prices consists of all pr > 0and py > 0 such thatA. Pæ/Py = 1B. Pz/Py 2 1C. Pz/Py < 1D. Pz/Py > 07. Now suppose A lexicographically prefers y to x and B considers x and y to be perfectcomplements. The set of competitive equilibrium allocationsA. includes the allocation (1,0) for A and (1,1) for BB. includes the allocation (1,0) for A and (1, 1) for BC. is emptyD. includes all allocations (x, 1) for A and (2 – r, 0) for B, where r e [0, 2] Consider an exchange economy with agents A and B and goods x and y. A's endowmentis (0,1) (i.e., no good r and 1 unit of y) and B's endowment is (2,0) (i.e., 2 units ofgood x and no good y. The agents can consume only nonnegative amounts of r and y.4. Suppose A lexicographically prefers r to y and B considers r and y to be perfect sub-stitutes, i.e., between bundles (x, y) and (x', y'), she strictly prefers (x, y) if and only ifx + y > x' + y'. The competitive equilibrium allocation for this economy isA. A gets (0, 1) and B gets (2,0).B. A gets (2,0) and B gets (0, 1).C. A gets (3/2,0) and B gets (1/2, 1).D. A gets (1,0) and B gets (1, 1).

Consider an exchange economy with agents A and B and goods x and y. A's endowment is (0, 1) (i.e., no good r and 1 unit of y) and B's endowment is (2,0) (i.e., 2 units of good x and no good y. The agents can consume only nonnegative amounts of x and y. 4. Suppose A lexicographically prefers r to y and B considers x and y to be perfect sub- stitutes, i.e., between bundles (x, y) and (x', y'), she strictly prefers (x, y) if and only if x + y > x' + y'. The competitive equilibrium allocation for this economy is A. A gets (0, 1) and B gets (2,0). B. A gets (2,0) and B gets (0, 1). C. A gets (3/2, 0) and B gets (1/2, 1). D. A gets (1, 0) and B gets (1,1).

Consider an exchange economy with agents A and B and goods x and y. A's endowment is (0, 1) (i.e., no good r and 1 unit of y) and B's endowment is (2,0) (i.e., 2 units of good x and no good y. The agents can consume only nonnegative amounts of x and y. 4. Suppose A lexicographically prefers r to y and B considers x and y to be perfect sub- stitutes, i.e., between bundles (x, y) and (x', y'), she strictly prefers (x, y) if and only if x + y > x' + y'. The competitive equilibrium allocation for this economy is A. A gets (0, 1) and B gets (2,0). B. A gets (2,0) and B gets (0, 1). C. A gets (3/2, 0) and B gets (1/2, 1). D. A gets (1, 0) and B gets (1,1).

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter13: General Equilibrium And Welfare

Section: Chapter Questions

Problem 13.5P

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