Re: exchange questions urgency

Posted by Amit Goyal on Jun 20, 2012; 12:12pm
URL: http://discussion-forum.276.s1.nabble.com/exchange-questions-urgency-tp7578292p7578336.html

Ok Good. So, this is what you wrote:
Step 2.1: For p(x) > 0, p(y) = 1, and income of individual 1 as m(1) solve for the demand of agent 1?
Demand for X: m(1)/p(x)
Demand for Y: 0

Step 2.2: For p(x) > 0, p(y) = 1, and income of individual 2 as m(2) solve for the demand of agent 2?
Demand for (X, Y):
(m(2)/p(x), 0) for p(x) < 1
Budget line for p(x) = 1
(0, m(2)) for p(x) > 1

Given, endowment of 1 is (0, 1)
and endowment of 2 is (2, 0)
m(1) = 1
m(2) = 2p(x)

Substituting them above, we get:

Demand for (X, Y) by 1:
(1/p(x), 0)

Demand for (X, Y) by 2:
(2, 0) for p(x) < 1
Budget line for p(x) = 1
(0, 2p(x)) for p(x) > 1

Now step 3: Find p(x) such that sum of demands for X is equal to 2.