considere a pure exchange economy with two connumeren, indexed byi-1.2, and two goods, indexed by l = 1.2. Consumers are endowed with goods.we = (40) fore connumere 1 and W₁ = (0.1) fare consumere 2. Preferences of eachConsumer are represented by the utility functions.AU₂ (xss X₂₂) = ln Rgs + ln £₁2U₂ (×₂₁, X₂=) = ln X₂₁ + 1/ ln X₂₂1 write down the budget comtraint fore connumeres in this problem. Inyour comtraint, let ty Are the price of good I and fo be the priceof good 2.2. Find the demand functions for both goods for comumer 1 andConsumen 2.- (2)- (4)3. Explain why the allocation (1₁, ₁2) = (0.5, 0.5) is Not farce toefficient.

A Pareto efficient allocation, also known as Pareto optimality or Pareto efficiency, is a state in…

considere a pure exchange economy with two connumeron, indered by i-1.2, and two goods, indexed by l=1.2. consumers are endowed with goods we (40) for Consumer 1 and w₁ = (0.1) fare consumere 2. Preferences of each Consumer are represented by the utility functions. A U₂ (X₁ X₂₂) = ln Xz₂ + ln % 12 - (2) - (4) 1 write down the budget comtreoint fore connumeres in this Amoblem. In your comtraint, let by be the price of good I and be the price of good 2.

considere a pure exchange economy with two connumeron, indered by i-1.2, and two goods, indexed by l=1.2. consumers are endowed with goods we (40) for Consumer 1 and w₁ = (0.1) fare consumere 2. Preferences of each Consumer are represented by the utility functions. A U₂ (X₁ X₂₂) = ln Xz₂ + ln % 12 - (2) - (4) 1 write down the budget comtreoint fore connumeres in this Amoblem. In your comtraint, let by be the price of good I and be the price of good 2.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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