Consider the pure exchange economy with 2 goods, good 1 and good 2, and two consumers, consumer A and consumer B. The consumers have the following utility functions: UA(X1A,X2A)=x1A+3×2A; UB(×1B,×2B)=x1B +x2B- Consumer A is initially endowed with 4 units of good A and no unit of good 2, that is, consumer A's initial endowment is (w1A,W2A)=(4,0). Consumer B is initially endowed with 3 units of good 2 and no unit of good 1, that is, (W1B,W2B)=(0,3). In order to implement the allocation (x1A,X2A)=(2,3), (x1B.,X2B)=(2,0) as a Walrasian equilibrium, what should the relative price p1/p2 of good 1 be?

Consider the pure exchange economy with 2 goods, good 1 and good 2, and two consumers, consumer A and consumer B. The consumers have the following utility functions: UA(X1A,X2A)=x1A+3×2A; UB(×1B,×2B)=x1B +x2B- Consumer A is initially endowed with 4 units of good A and no unit of good 2, that is, consumer A's initial endowment is (w1A,W2A)=(4,0). Consumer B is initially endowed with 3 units of good 2 and no unit of good 1, that is, (W1B,W2B)=(0,3). In order to implement the allocation (x1A,X2A)=(2,3), (x1B.,X2B)=(2,0) as a Walrasian equilibrium, what should the relative price p1/p2 of good 1 be?

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section: Chapter Questions

Problem 24SQ

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Consider the pure exchange economy with 2 goods, good 1 and good 2, and two consumers, consumer A and consumer B. The consumers have the following utility functions: UA(X1A,X2A)=X1A+3x2A; UB(X1B,X2B)=x1B +X2B. Consumer A is initially endowed with 4 units of good A and no unit of good 2, that is, consumer A's initial endowment is (W1A,W2A)=(4,0). Consumer B is initially endowed with 3 units of good 2 and no unit of good 1, that is, (WIB,W2B)=(0,3). In order to implement the allocation (x1A,X2A)=(0,1), (x1B,X2B)=(4,2) as a Walrasian equilibrium, what transfer of wealth should we make between the consumers if good 1 is the numeraire, that is, if p1 =1? O a. An amount 7 of wealth should be transferred from consumer A to consumer B. O b. None of the other answers. An amount 3 of wealth should be transferred from consumer A to consumer B. O c. d. An amount 3 of wealth should be transferred from consumer B to consumer A. An amount 7 of wealth should be transferred from consumer B to consumer…
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