Consider a two-agents, two goods economy, in which both agents, A and B, are represented by the following utility function: UA(*1, r2) = rr2 UB(yn, y2) = y1y There are w units of each good in the economy. 1. Characterize the set of Pareto optimal allocations and represent it in the Edgeworth box. The 3 units of each goods are initially share as follows: A has w units of good 1 and zero unit of good 2; B has zero unit of good 1 and w units of good 2. 2. Determine the Walrasian equilibrium 3. Represent the economy in the Edgeworth box.

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Chapter1: Making Economics Decisions
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Consider a two-agents, two goods economy, in which both agents, A and B, are represented
by the following utility function:
UA(1, 22) = rr2
UB(y1, Y2) = Y1y%
There are w units of each good in the economy.
1. Characterize the set of Pareto optimal allocations and represent it in the Edgeworth
box.
The 3 units of each goods are initially share as follows: A has w units of good 1 and zero
unit of good 2; B has zero unit of good 1 and w units of good 2.
2. Determine the Walrasian equilibrium
3. Represent the economy in the Edgeworth box.
Transcribed Image Text:Consider a two-agents, two goods economy, in which both agents, A and B, are represented by the following utility function: UA(1, 22) = rr2 UB(y1, Y2) = Y1y% There are w units of each good in the economy. 1. Characterize the set of Pareto optimal allocations and represent it in the Edgeworth box. The 3 units of each goods are initially share as follows: A has w units of good 1 and zero unit of good 2; B has zero unit of good 1 and w units of good 2. 2. Determine the Walrasian equilibrium 3. Represent the economy in the Edgeworth box.
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