Consider the following pure exchange, Edgeworth box economy. There are two consumers, Adam and Mark, and two goods. Adam has an endowment of 7 units of good 1 and 3 units of good 2 (i.e. wadam = (7, 3)), while Mark has an endowment of 3 units of good 1 and 7 units of good2 (wmark$ = (3,7)). The consumers' utility functions are given by: Uadam = Xa1 + Xa2 and Umark = min{xm1, Xm2) where xj1 is the consumption of good 1 by consumer (i = adam, mark) (a) Find the set of Pareto optimal allocations of this economy (b) Find the Walrasian equilibrium. %3D %3D
Consider the following pure exchange, Edgeworth box economy. There are two consumers, Adam and Mark, and two goods. Adam has an endowment of 7 units of good 1 and 3 units of good 2 (i.e. wadam = (7, 3)), while Mark has an endowment of 3 units of good 1 and 7 units of good2 (wmark$ = (3,7)). The consumers' utility functions are given by: Uadam = Xa1 + Xa2 and Umark = min{xm1, Xm2) where xj1 is the consumption of good 1 by consumer (i = adam, mark) (a) Find the set of Pareto optimal allocations of this economy (b) Find the Walrasian equilibrium. %3D %3D
Chapter13: General Equilibrium And Welfare
Section: Chapter Questions
Problem 13.5P
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Transcribed Image Text:Consider the following pure exchange,
Edgeworth box economy. There are two
consumers, Adam and Mark, and two goods.
Adam has an endowment of 7 units of good 1
and 3 units of good 2 (i.e. wadam = (7, 3)),
while Mark has an endowment of 3 units of
good 1 and 7 units of good2 (wmark$ = (3,7)).
The consumers' utility functions are given by:
Uadam = Xa1 + Xa2 and Umark = min{xm1,
Xm2) where x¡1 is the consumption of good 1
by consumer (i = adam, mark)
(a) Find the set of Pareto optimal allocations
of this economy
(b) Find the Walrasian equilibrium.
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