There is given a market of two traders and two goods described by the simple model of
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There is given a market of two traders and two goods described by the simple model of exchange, in which:
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i = 1, 2-an index of consumer goods, k = 1, 2-an index of traders (consumers), Xk = R2-a goods space of k-th trader, uk: R R-a utility function of k-th trader describing her/his preferences (relation of k-th consumer's preference), ak = (aki, ak2) = R2-an initial bundle the k-th consumer comes to the market with, xk = (Xk1, Xk2) R-a consumption bundle the k-th consumer wants to purchase. = The k-th (k = 1, 2) consumer aims to purchase such a bundle of goods (Xk1, Xk2), whose utility would be maximum and at the same time not less than of the initial bundle of goods ak= (aki, ak2). Let us consider cases when: (a) uk (xk) =ak1 In xk1 +ak2 In xk2 max, (b) uk (xk)=ak1x + ak2x%2 max. Using the Edgeworth box: 1. present geometric illustration of sets of allocations: feasible with regard to an initial allocation, accepted by traders, Pareto optimal, 2. determine which allocations are blocked by traders, 3. justify that C(a) = S(a) F(a) C R4.
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Related Book For
Microeconomics Static And Dynamic Analysis Springer Texts In Business And Economics
ISBN: 9783031105531
1st Edition
Authors: Krzysztof Malaga, Karolina Sobczak
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