Re: DSE Q.NO-34 2010

Posted by poonam on Jun 23, 2011; 4:59am
URL: http://discussion-forum.276.s1.nabble.com/DSE-Q-NO-34-2010-tp6502921p6507174.html

 Following id the approach i used... kindly let me know if its correct.
general equilibrium is a pareto efficient allocation , for a "given" price level.
So price ratio will be the slope of the line passing through the initial endowment and the pareto efficient allocation.

by the same logic... the movement from initial endowment to (2,1)  (0,0) will not take place because that is possible only if the price of good 1 is equal to zero.

and the initial allocation is not pareto efficient. so the answer becomes null set.

would the above approach be applicable everytime ??