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The following data is the starting point for Questions 1-4. Consider an exchange economy with two agents, 1 and 2, and two goods, X and Y . Agent 1’s endowment is (0, 10) and Agent 2’s endowment is (11, 0). Agent 1 strictly prefers bundle (a, b) to bundle (c, d) if, either a > c, or a = c and b > d. Agent 2 strictly prefers bundle (a, b) to bundle (c, d) if min{a, b} > min{c, d}. For both agents, we say that bundle (a, b) is indifferent to bundle (c, d) if, neither (a, b), nor (c, d), is strictly preferred to the other Question 9. Suppose only agent 2’s preferences are changed. The changed preference is such that agent 2 strictly prefers bundle (a, b) to bundle (c, d) if, either b > d, or b = d and a > c. Then,
(a) there is no equilibrium price ratio
(b) both of the following are true
(c) pX/pY = 0 is an equilibrium price ratio
(d) pX/pY > 0 is an equilibrium price ratio Answer: (d)
I JUST wanted to know how will the agents utility function be affected i found solution but i m still not clear why we need to deal like it
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