# micro-ex-9 - Ani Guerdjikova Department of Economics...

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Ani Guerdjikova Fall 2006 Department of Economics Intermediate Microeconomics Cornell University ECON 313 Problem Set 9 Problem 35 (Exchange economy) Consider an exchange economy with two consumers A and B and two goods x and y .T h e preferences of the consumers are given by the utility functions: U A ( x A ; y A )= x A y A , U B ( x B ; y B )= x B y B . Consumer A has an initial endowment x A y A ) = (15; 2) ,consumer B ’s initial endowment is x B y B )=(3 ;10) . The price of good x is normalized at p x =1 , the price of y is denoted by p y . a) Draw the Edgeworth box for this economy. Determine the utility both consumers derive from their initial endowment. Draw their indifference curves through the point of initial endowment in your graph. b) Explain the notion of a contract curve. Derive the equation of the contract curve and draw it in your graph. c) Determine the Marshall demand functions of the consumers for an arbitrary price p

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## This homework help was uploaded on 04/17/2008 for the course ECON 3130 taught by Professor Masson during the Fall '06 term at Cornell University (Engineering School).

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micro-ex-9 - Ani Guerdjikova Department of Economics...

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