26. In an exchange economy there are two people (A and B), and two goods (x₁ and 2₂). Their respective utility functions and endowments are: UA (x₁, x²) = x₁ + 2x^, U³ (x³, x²) = 2x³ + x², w₁ = = (1,1), (1,1). What are the minimum and maximum possible amounts of r on the contract curve? WB = 27. (continues using scenario from previous question) What are the minimum and maximum possible amounts of x in the core? 28. (continues using scenario from previous question) Are the core and the contract curve identical in this particular example?
26. In an exchange economy there are two people (A and B), and two goods (x₁ and 2₂). Their respective utility functions and endowments are: UA (x₁, x²) = x₁ + 2x^, U³ (x³, x²) = 2x³ + x², w₁ = = (1,1), (1,1). What are the minimum and maximum possible amounts of r on the contract curve? WB = 27. (continues using scenario from previous question) What are the minimum and maximum possible amounts of x in the core? 28. (continues using scenario from previous question) Are the core and the contract curve identical in this particular example?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:26. In an exchange economy there are two people (A and B), and two goods (₁ and 2). Their respective
utility functions and endowments are: Uª (x₁,x) = x + 2x2, U³ (x³, x) = 2x³ + x², w₁ = (1, 1),
WB = (1, 1). What are the minimum and maximum possible amounts of rf on the contract curve?
27. (continues using scenario from previous question) What are the minimum and maximum possible
amounts of x in the core?
28. (continues using scenario from previous question) Are the core and the contract curve identical in this
particular example?
29. (continues using scenario from previous question) Suppose that in equilibrium, the utility of consumer
A is 3.5 (UA = 3.5). Set p2 = 1. Find the equilibrium price p₁, the equilibrium quantities and the
utility of consumer B.
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