Gen Eqm practice ques...

[Akshay Jain]

[hbk]

how to find endowments with given competitive eqbm allocation.

[xyz123]

Endowment is the first option

[mrittik]

the 1st one is endowment

[Arushi1]

Endowment is option 1 and competitive prices- px=py>0

Please check?!

[hbk]

option 1 seems correct but i m getting m1 as 5p2 so 0,5 should be 1st.person endwmnt..

[hs]

endowment optn 1
and price ratio shud be 1 as if p(X)/P(y)>1/2(mrs) person 1 will only want to consume y so eqm cant be the given soln

[SoniaKapoor]

q1 a
q2 b

[Akshay Jain]

Answers are...ques 1..(1) option
Ques 2..(3) option

[SoniaKapoor]

in second quest hw is px=py??Akshay pls tell

[Akshay Jain]

If u join the competitve eqm allocation and the endowment in the 1st ques by a line then the slope of that line is the price ratio vch is equal to -1....so px=py

[SoniaKapoor]

@akshay still i didnt get :((

[Akshay Jain]

The common budget line passes thru the endowment and the comp eqm allocation...so its just the slope,of the budget line......try to draw the box nd ICs...it will b clear....

[hbk]

akshay kindly tell me the whole procedure to solve this ques.

[Akshay Jain]

This ques can also b done graphically....

[SoniaKapoor]

PLs explain the second one :(

[Akshay Jain]

[hbk]

@ akshay .. i m not getting ur point in first part u used utilty function to derive endwmnts but utility functns are used to check pareto efficiency and to competitive aur endowment it must satisfy budgt constraint or demand function and secondly if px=py then mrs >px/py then he has perfect substitutes so he should consume only one and if he is consuming both then mrs=price ratio..