Consider an exchange economy with two-person and initial endowments (𝑥11, 𝑥21, 𝑥12, 𝑥22)
Posted: Thu May 19, 2022 7:54 am
Consider an exchange economy with two-person and initial
endowments (𝑥11, 𝑥21, 𝑥12, 𝑥22) = (50, 250, 50, 25), and utility
functions 𝑈1(𝑋1) = 𝑥11𝑥21 and 𝑥12𝑥22 = ) ( 2 2 X U
Note the superscripts 1 and denote individual 1 and 2,
respectively. Derive the equation defining the contract curve. What
does it tell? Solve for the competitive-equilibrium allocation and
prices. Show them graphically.
endowments (𝑥11, 𝑥21, 𝑥12, 𝑥22) = (50, 250, 50, 25), and utility
functions 𝑈1(𝑋1) = 𝑥11𝑥21 and 𝑥12𝑥22 = ) ( 2 2 X U
Note the superscripts 1 and denote individual 1 and 2,
respectively. Derive the equation defining the contract curve. What
does it tell? Solve for the competitive-equilibrium allocation and
prices. Show them graphically.