10. Suppose we have a pure exchange economy with two goods. There are two consumers (named A and B) in the economy. The endowments of A and B are (6,2) and (2,4) respectively. The utility function of A is u₁(x,x) = (x4) 0.8 (x)0.2. The utility function of B is ug (x,x) = (x) 0.6 (x2)0.4. Find market clearing prices for this economy. Draw the Edgeworth Box Diagram for this economy. Plot the endowment allocation and the competitive outcome in the diagram. Draw the budget line for A and B using the market-clearing prices.

10. Suppose we have a pure exchange economy with two goods. There are two consumers (named A and B) in the economy. The endowments of A and B are (6,2) and (2,4) respectively. The utility function of A is u₁(x,x) = (x4) 0.8 (x)0.2. The utility function of B is ug (x,x) = (x) 0.6 (x2)0.4. Find market clearing prices for this economy. Draw the Edgeworth Box Diagram for this economy. Plot the endowment allocation and the competitive outcome in the diagram. Draw the budget line for A and B using the market-clearing prices.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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