Re: DSE 2006

Posted by Chinni18 on Jun 08, 2012; 3:47am
URL: http://discussion-forum.276.s1.nabble.com/DSE-2006-tp7577468p7577565.html

@ sonu delhi DSE 2005
As usual maximise their utility to get (x1*,y1*)=(100,100) and (x2*,y2*)=(50,0)
We get this by normalising p1=1 and p2>1 because for consumer 2 it is the case of perfect substitutes.
For competitive equilibrium allocation you see that option d gives maximum utility and satisfies our conditions
For pareto efficient, in option a you cannot make anyone better off.
For price ratio we know that p1=1 and p2>1 i.e. p2>p1. Only option c satisfies this condition