Question

You allocate the resources (xA∗ 1 , xA∗ 2 ) = (3, 1) and (xB∗ 1 , xB∗ 2 ) = (5, 5). Is this Pareto efficient? ii. What would be the relative price p∗ 1/p∗ 2 in the above allocation of resources? iii. Suppose that A and B have initial endowments (¯xA 1 , ¯xA 2 ) = (2, 4) and (¯xB 1 , ¯xB 2 ) = (6, 2). Assuming p2 = 1 for normalization, what would you do to achieve the above allocation of resources? iv. Solve the utility maximization of two consumers with reallocated resources and confirm that you ac

          You allocate the resources (xA∗
1 , xA∗
2 ) = (3, 1) and (xB∗
1 , xB∗
2 ) = (5, 5). Is this Pareto
efficient?
ii. What would be the relative price p∗
1/p∗
2 in the above allocation of resources?
iii. Suppose that A and B have initial endowments (¯xA
1 , ¯xA
2 ) = (2, 4) and (¯xB
1 , ¯xB
2 ) =
(6, 2). Assuming p2 = 1 for normalization, what would you do to achieve the above
allocation of resources?
iv. Solve the utility maximization of two consumers with reallocated resources and
confirm that you ac

Added by Matthew W.

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