Login  Register

Exchange Problems

classic Classic list List threaded Threaded
9 messages Options Options
Embed post
Permalink
s-2
Reply | Threaded
Open this post in threaded view
| More
Print post
Permalink

Exchange Problems

s-2
CONTENTS DELETED
The author has deleted this message.
Reply | Threaded
Open this post in threaded view
| More
Print post
Permalink

Re: Exchange Problems

duck
442 posts
Hi shreya.. :)

Q1> option A is false.
Consider an allocation A where both individuals are worse off than they are at B(another allocation), it shows that if we move from A to B, both can be made better off. Hence, by definition of Pareto Efficiency, allocation A cannot be pareto optimum.
Therefore,Pareto efficient allocation cannot be an allocation where both are worse off than they are at an allocation that is not Pareto efficient.


Q2> want some clarification.Does the utility of individual A contains x2B or was it a typo?
:)
s-2
Reply | Threaded
Open this post in threaded view
| More
Print post
Permalink

Re: Exchange Problems

s-2
CONTENTS DELETED
The author has deleted this message.
Reply | Threaded
Open this post in threaded view
| More
Print post
Permalink

Re: Exchange Problems

divya
5 posts
hello shreya:)
which buks are u doing for exchange???
Reply | Threaded
Open this post in threaded view
| More
Print post
Permalink

Re: Exchange Problems

duck
442 posts
In reply to this post by s-2
Hi shreya.. :)

Had it been x2A then, you can follow the usual method of equating MRS of both individuals to get Pareto Efficient Points.
You will get 45 degree line in the edgeworth box.

However, if its given x2B in the book, then it becomes a problem of externality.
In order to find Pareto Efficient Points in this case, you can substitute (10-x2A) in case of x2B
[since, total demand for good2 i.e x2A + x2B= total endownment of good 2 i.e 10 units ]
and then proceed in the same way as above.



:)
Reply | Threaded
Open this post in threaded view
| More
Print post
Permalink

Re: Exchange Problems

Priyanka kothari
6 posts
Hi Duck

this wont give the allocations in core. i think what you have answered is just Pareto efficient allocation. core is proper subset of pareto efficient allocation.
eg ((10,10),(0,0)) is pareto efficient but not in core

do correct me if i am wrong...

:)
Reply | Threaded
Open this post in threaded view
| More
Print post
Permalink

Re: Exchange Problems

Priyanka kothari
6 posts
as far as i knowThe core is the subset of the pareto optimal allocations in which no one will block any allocation within the core. The easy interpretation of the core is that it is the pareto optimal allocations that noone is worse than their initial endowment
Reply | Threaded
Open this post in threaded view
| More
Print post
Permalink

Re: Exchange Problems

duck
442 posts
In reply to this post by Priyanka kothari
Hi megha.. :)

i mentioned Pareto Efficient Points.




:)
s-2
Reply | Threaded
Open this post in threaded view
| More
Print post
Permalink

Re: Exchange Problems

s-2
In reply to this post by divya
CONTENTS DELETED
The author has deleted this message.