Answer to Question #180560 in Microeconomics for rohan

Question

Two consumers (A and B) consume two goods (X and Y) in a pure exchange economy, their preferences and endowment are given as; UA(XA,YA) = XA 0.75YA 0.25 UB(XB,YB) = XB YB WA = (8, 2) WB = (2, 8) (i) Draw an appropriate Edge-worth box showing the endowments. (ii) Is the initial allocation efficient? Explain. (iii)What will be the general equilibrium price ratio and allocation?

Answer 1

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