Question A.3 (iv) Consider an economy with a single physical commodity and uncertainty captured by two states of nature S = {a,b}. This economy is endowed with markets for two assets with payoffs r] = [1 2] and r = [2 0] in states a and b respectively. There are on aggregate ten units of the commodity available in each state of nature. The economy is populated by two individuals h, k. Individual h has preferences Un (xħ(a), xħ(b)) = log äħ(a) + log ¤ħ (b). At equilibrium, x₁(a) 6 while x(b) = 2xk(a). Find equilibrium asset prices and allocation of the commodity in each state. =

Question A.3 (iv) Consider an economy with a single physical commodity and uncertainty captured by two states of nature S = {a,b}. This economy is endowed with markets for two assets with payoffs r] = [1 2] and r = [2 0] in states a and b respectively. There are on aggregate ten units of the commodity available in each state of nature. The economy is populated by two individuals h, k. Individual h has preferences Un (xħ(a), xħ(b)) = log äħ(a) + log ¤ħ (b). At equilibrium, x₁(a) 6 while x(b) = 2xk(a). Find equilibrium asset prices and allocation of the commodity in each state. =

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Only Answer PART (c) PLEASE PROVIDE CLEAR SOLUTION WITH CLEAR STEPS AND EXPLANATION - DO NOT ANSWER IF YOU ARE NOT CONFIDENT
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