Re: ISI INTERVIEW PREP

Posted by Preet on Jul 04, 2012; 6:09pm
URL: http://discussion-forum.276.s1.nabble.com/ISI-INTERVIEW-PREP-tp7578819p7579043.html

Neha, the only way the competetive equilibrium can exist is if good y is a free good. Now, if good y is a free good then Agent 2's income will be zero. hence he cannot consume any of the good x. Agent 1 will consume all x=999 and y belonging to (999,1000).. Hope this makes it clear.

neha wrote

This is regarding the question number 6 of DSE 2004
http://economicsentrance.weebly.com/uploads/1/1/0/5/1105777/26_jun_2004_option_a.pdf

why the answer is option (b)? Is nt it about favoring the individual 1???  I mean the set of allocations is pareto optimum,, and hence can be competitive under certain conditions but this set does not contain all the competitive allocations.