Suppose there are two individuals and two goods. The initial endowments are wi = (100, 0) and we = (100, 100). Preferences are given by u1(r, y) = x+ y and u2(r, y) = y (a) Is there any equilibrium? If so, derive one. If not, prove that. (b) Now suppose initial endowments are wi = (100,1) and wy = (100, 99). How does your answer change? (c) What if initial endowments are wi = (100, 2) and w2 = (100, 98)?

Suppose there are two individuals and two goods. The initial endowments are wi = (100, 0) and we = (100, 100). Preferences are given by u1(r, y) = x+ y and u2(r, y) = y (a) Is there any equilibrium? If so, derive one. If not, prove that. (b) Now suppose initial endowments are wi = (100,1) and wy = (100, 99). How does your answer change? (c) What if initial endowments are wi = (100, 2) and w2 = (100, 98)?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter3: Preferences And Utility

Section: Chapter Questions

Problem 3.9P

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