Consider an economy, where there is a single consumption good and two states ofnature {a, b}. There are two consumers, A and B, with preferences and (random)endowments as follows:E logt A (a) + logzA(6), (ел(а), ед()) — (1, 2)• Agent A: ua (xA(a), xA(b)). Agent B: ив (лв (а), тв ()) — 1oga в (а) + loga в (), (ев(а), ев ()) — (3, 1)(i) In order to hedge against risk individuals can trade two securities with returns()-denominated in units of the commodity: ri =and r2where thetop payoff refers to state a and the bottom to state b. How many units of the assetri will be held by individual A at equilibrium?

The steady state of the model can be found by setting the growth rates of each variable equal to…

Consider an economy, where there is a single consumption good and two states of nature {a,b}. There are two consumers, A and B, with preferences and (random) endowments as follows: Agent A: uÂ (¤Â(a),ïÂ(b)) = logxÂ(ª) + logïÂ(b), (¤Â(a), ¤Â(b)) = (1,2) ● Agent B: uß (¤Â(a), xß(b)) = logxß(a) + logxß(b), (eß(a), eß(b)) = (3, 1) (i) In order to hedge against risk individuals can trade two securities with returns · (¹), (9), where the top payoff refers to state a and the bottom to state 6. How many units of the asset r₁ will be held by individual A at equilibrium? denominated in units of the commodity: r₁ = and r2 =

Consider an economy, where there is a single consumption good and two states of nature {a,b}. There are two consumers, A and B, with preferences and (random) endowments as follows: Agent A: uÂ (¤Â(a),ïÂ(b)) = logxÂ(ª) + logïÂ(b), (¤Â(a), ¤Â(b)) = (1,2) ● Agent B: uß (¤Â(a), xß(b)) = logxß(a) + logxß(b), (eß(a), eß(b)) = (3, 1) (i) In order to hedge against risk individuals can trade two securities with returns · (¹), (9), where the top payoff refers to state a and the bottom to state 6. How many units of the asset r₁ will be held by individual A at equilibrium? denominated in units of the commodity: r₁ = and r2 =

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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