2(b)There are three people and two goods in an economy. The utility given below: U1 = X11X 12 U2 = 2x 21+ X 22 U3 = X 31 X 32+X 32 W; (0,8) W (2,2) W3= (8,0) Suppose it is suggested that the three traders move to the allocation x given by x;= (1,2), x2= (8, 4), X3= (1,4)

2(b)There are three people and two goods in an economy. The utility given below: U1 = X11X 12 U2 = 2x 21+ X 22 U3 = X 31 X 32+X 32 W; (0,8) W (2,2) W3= (8,0) Suppose it is suggested that the three traders move to the allocation x given by x;= (1,2), x2= (8, 4), X3= (1,4)

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2(b)There are three people and two goods in an economy. The utility functions and the initial bundles are
given below:
U1 = X11X 12
U2 = 2x 21+ X 22
U3 =X 31 X 32+X 32
W; = (0,8)
w (2,2)
W3= (8,0)
Suppose it is suggested that the three traders move to the allocation x given by x;= (1,2), x2= (8, 4),
X3= (1,4)
a. Calculate the MRS for the three at the allocation x.
b. Show that x makes no one worse off than the original allocation.
C. Show that x is not in the core.

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