general eqmm quest

[SoniaKapoor]

Consider the following pure exchange, Edgeworth box economy.  There are 2 consumers and 2 goods. Consumer 1 has an endowment of 7 units of good 1 and 3 units of good 2 (i.e. w1 = (7,3)), while consumer 2 has an endowment of 3 units of good 1 and 7 units of good 2 (w2 = (3,7)).  The consumers’ utility functions are given by:
U1 = x11 + x12 and U2 = min{x21,x22}
      where xi1 is consumption of good 1 by consumer i.

a) Find the set of Pareto optimal allocations of this economy.
b) Find the core of the economy.
c) Find the Walrasian equilibrium.


part c....anyone????????

[mrittik]

for the Walrasian Eqm or Comp Eqm the only possibility for the price is p1=p2=1....then u can solve for it

[Sumit]

Try to do this question as well with the help of edgeworth box n stick with the definition of Walrasian equ which is a comp equilibrium where all the agents max there utility and total demand of each type of goods by agents should be equal to total supply.(anyways answer is p1=p2=1)

Ps: Follow above standarized and simple way to easily solve gen equilibrium questions.

[mrittik]

thanks sumit......this is because the price taker in the market who has the utility fn of substituted goods....but the second one is imprisoned in the impasse of choice...both of goods are needed by her....so it is not possible for her as a price taker or to buy the cheapest one....