Problem 2. Assume N(t) = 100 for all t > 0 and endowmentswi = [2, 1] for all h = 2, 4..., 100;w = [1, 1] for all h = 1, 3, ..., 99.The utility function is:•••)u? (c) (t) , c† (t + 1)) = c¢ (t) c* (t + 1) .Consider the social security system that is financed from taxes t (t), t; (t + 1) =[1, –1]. That is, young agent contribute 1 and old agents receive 1. Deter-mine if competitive equilibrium with social security is Pareto superior tocompetitive equilibrium without social security.

Problem 2. Assume N(t) = 100 for all t ≥ 0 and endowments wh = [2, 1] for all h = 2, 4..., 100; ... wh = [1,1] for all h = 1, 3, . ,99. The utility function is: uh (ch (t), ch (t+1)) = ch (t) ch (t + 1) . Consider the social security system that is financed from taxes [th (t), th (t + 1)] = [1,−1]. That is, young agent contribute 1 and old agents receive 1. Deter- mine if competitive equilibrium with social security is Pareto superior to competitive equilibrium without social security.

Problem 2. Assume N(t) = 100 for all t ≥ 0 and endowments wh = [2, 1] for all h = 2, 4..., 100; ... wh = [1,1] for all h = 1, 3, . ,99. The utility function is: uh (ch (t), ch (t+1)) = ch (t) ch (t + 1) . Consider the social security system that is financed from taxes [th (t), th (t + 1)] = [1,−1]. That is, young agent contribute 1 and old agents receive 1. Deter- mine if competitive equilibrium with social security is Pareto superior to competitive equilibrium without social security.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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