soluGE-1 - -And let us choose 2 p as the numeraire price so...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Solution GE #3 Let c A w be the apple Charlie has. c B w be the banana Charlie has D A w be the apple Doris has D B w be the banana Doris has Then the money income of each one is given by the value of his or her endowment: 1 2 c C c A B m p w p w = + 1 2 D D D A B m p w p w = + And the utility function gave rise to the following demand functions: 1 2 c C m A p = 2 2 c C m B p = 1 2 D D m A p = 2 2 D D m B p = Then the aggregate excess demands for the two goods are 1 2 1 ( , ) 2 c D c D a A A m m z p p w w p + = - - = 1 2 1 2 1 2 c c D D c D A B A B A A p w p w p w p w w w p + + + - - 1 2 2 ( , ) 2 c D c D b B B m m z p p w w p + = - - = 1 2 1 2 2 2 c c D D c D A B A B B B p w p w p w p w w w p + + +
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: --And let us choose 2 p as the numeraire price, so that these equations become 1 1 1 1 ( ,1) 2 c c D D c D A B A B a A A p w w p w w z p w w p + + + =--1 1 1 ( ,1) 2 c c D D c D A B A B b B B p w w p w w z p w w + + + =--=> 1 C D B B C D A A w w p w w + = + = 1 3 , 2 1 p = 1 2 c C m A p = =9 2 2 c C m B p = =3 1 2 D D m A p = =9 2 2 D D m B p = =3...
View Full Document

Page1 / 2

soluGE-1 - -And let us choose 2 p as the numeraire price so...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online