problemset5 - Due May 25, 2010 Economics 100B...

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Economics 100B Due May 25, 2010 Microeconomics Spring 2010 James Rauch PROBLEM SET 5: General Equilibrium and Economic Welfare with two markets Consider an economy populated by a representative consumer with preferences given by U(X,Y) = X Y and endowment ( , ) = (10,15). 2 yx 1. Let Y be the numeraire good, i.e., set p = 1. Find p that clears the X market. 2. Using your answer to problem 1, find the value of consumer income. 3. Using your answers to problems 1 and 2, verify that Walras’ Law holds, i.e.,
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