= 2yD/xD for David and MRSxy = a) Consider an economy with 3 agents, Mohammed (M), David (D) and Susan (S). There are two goods available, good x, and good y. The marginal rates of substitution (where good x is on the horizontal axis and good y is on the vertical axis) are given by MRSM 2yM/xM for Mohammed, MRSxy ys/xs for Mohammed and David are both consuming twice as much of the good x than good y, while Susan is consuming equal amounts of x and y. What are the conditions for Pareto efficiency in an exchange economy? Are these consumption levels economically efficient? Can these consumption allocations be observed in a perfectly competitive equilibrium in an exchange economy without production? Explain. =

ENGR.ECONOMIC ANALYSIS
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6.
=
2yD/xD for David and MRSxy
a) Consider an economy with 3 agents, Mohammed (M), David (D) and Susan (S). There are
two goods available, good x, and good y. The marginal rates of substitution (where good x is
on the horizontal axis and good y is on the vertical axis) are given by MRSxy 2yM/xM for
Mohammed, MRSxy
ys/xs for Mohammed and David are
both consuming twice as much of the good x than good y, while Susan is consuming equal
amounts of x and y. What are the conditions for Pareto efficiency in an exchange economy?
Are these consumption levels economically efficient? Can these consumption allocations be
observed in a perfectly competitive equilibrium in an exchange economy without production?
Explain.
-
Transcribed Image Text:6. = 2yD/xD for David and MRSxy a) Consider an economy with 3 agents, Mohammed (M), David (D) and Susan (S). There are two goods available, good x, and good y. The marginal rates of substitution (where good x is on the horizontal axis and good y is on the vertical axis) are given by MRSxy 2yM/xM for Mohammed, MRSxy ys/xs for Mohammed and David are both consuming twice as much of the good x than good y, while Susan is consuming equal amounts of x and y. What are the conditions for Pareto efficiency in an exchange economy? Are these consumption levels economically efficient? Can these consumption allocations be observed in a perfectly competitive equilibrium in an exchange economy without production? Explain. -
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