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Unformatted text preview: b) Draw the indifference curves of Tony and Michelle that pass through their initial endowment c) Is there any gain from trade? d) Find the Pareto optimal allocation of this economy Question 2 Consider an economy with 3 goods ( x 1 , x 2 , and x 3 ) and the excess demand function for good 2 and 3 are as follow: 2 2 4 1 2 3 1 3 1 2 3 1 3 1 2 2--=-+-= p p p p z p p p p z a) Find the excess demand function of good1 b) If we set the price of good 1 as a numeraire, calculate the Walrasian equilibrium of this economy c) Verify that the prices in (b) clear all three markets...
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This note was uploaded on 03/14/2010 for the course ECON microecono taught by Professor Yy during the Spring '10 term at Seoul National.
- Spring '10