A has utility function u4(x4) = xf + x and initial endowment w4 B has utility function u3 (xB) = xf •x% and initial endowment wB = (3,6). = (3,6). Consumer (a) Is the initial endowment a Pareto efficient allocation? Justify your answer. (b) Find a competitive equilibrium (p, x4, x³) for the economy. (c) Construct the contract curve. A picture here is not a complete answer; you need to specify analytically the set of points that are in the contract curve.

A has utility function u4(x4) = xf + x and initial endowment w4 B has utility function u3 (xB) = xf •x% and initial endowment wB = (3,6). = (3,6). Consumer (a) Is the initial endowment a Pareto efficient allocation? Justify your answer. (b) Find a competitive equilibrium (p, x4, x³) for the economy. (c) Construct the contract curve. A picture here is not a complete answer; you need to specify analytically the set of points that are in the contract curve.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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