HW4(2).pdf - ECON104B Intermediate Microeconomic Theory Spring 2019 University of California Riverside Homework 4 Due in the beginning of Lecture at

# HW4(2).pdf - ECON104B Intermediate Microeconomic Theory...

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ECON104B: Intermediate Microeconomic Theory Spring 2019 University of California, Riverside Homework 4 : Due in the beginning of Lecture, at 3:40 pm, Tuesday, May, 14, 2019. Please answer the following questions. 1. Consider the following Edgeworth-box type of pure exchange economy, with two commodities ( x, y ), and total resources (¯ ω x , ¯ ω y ) = (5 , 10) . Consumers A and B have identical preferences represented by the following utility function, u i ( x i , y i ) = x i y i i = A, B. Also, suppose initial endowments are, ω A x = 2 , ω A y = 1 ω B x = 3 , ω B y = 9 (a) Draw the box and the endowment point. (b) Define and draw the set of Pareto efficient allocations (or contract curve). (c) Given your answer in ( b ), was the initial endowment of resources Pareto efficient? (d) Derive the offer curves of A, B. (e) Derive the Walrasian equilibrium, prices and allocations. (f) Is the equilibrium efficient?

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