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Unformatted text preview: Homework Assignment # 6 Econ 121b. Intermediate Microeconomics due March 30, 2011 Please put your discussion-section time on your answer. 1. Consider a pure-exchange economy with two consumers, A and B , and two goods, 1 and 2 . For each ` D 1 or 2 and i D A or B , write x i ` for consumer i ’s consumption of good ` . The utility functions are of Cobb-Douglas type: u A .x A 1 ;x A 2 / D .x A 1 / ˛ .x A 2 / 1 ˛ and u B .x B 1 ;x B 2 / D q x B 1 x B 2 ; where 1 2 < ˛ < 1 is a taste parameter. The endowments of consumers A and B are ! A D .! A 1 ;! A 2 / and ! B D .! B 1 ;! B 2 /; respectively. Finally, to ease the notation, write N ! 1 D ! A 1 C ! B 1 and N ! 2 D ! A 2 C ! B 2 : (a) What is the set of feasible allocations in this economy? (b) Draw the Edgeworth box for this economy. Label the axis appropriately, indicate the size of each edge and locate the endowment point. Draw a couple of indiffer- ence curves for each consumer....
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This note was uploaded on 03/01/2012 for the course ECON 121 taught by Professor Samuelson during the Spring '09 term at Yale.
- Spring '09