Two traders come to a market with bundles of goods: a 1 = (10, 20). Their utility
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Two traders come to a market with bundles of goods: a1 = (10, 20). Their utility functions are following: a2 = (20),
Exercise 2
There is given a market of two traders and two goods described by the static Arrow-Hurwicz model, in which:
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(a) u(x11, X12) = ln x1 + ln x12, u(x21, x22) = ln x21 + In x22, (b) u(x11, 12) = x +x1/4, u(x21, x22) = x1 + x2*,. 1/4 1/4 1/4 Consider a discrete-time version of dynamic discrete-time Arrow-Hurwicz model. A broker announces initial prices: p(0) = (2,4). Using a form of the excess demand function and a structure of the Walrasian equilibrium price vector found in Exercise 2 for the static Arrow-Hurwicz model: 1. Determine trajectories of a price vector satisfying a system of equations of the dynamic discrete-time Arrow-Hurwicz model, taking a proportionality coefficient o equal to 0.25, 0.35 and 1.25. Calculate price ratios P20and compare them with the equilibrium price ratio 2. State which trajectories determined in point 1 are feasible. 3. State if and when (in which period) a structure of prices stabilizes around the equilibrium price structure and whether it reaches this structure in time horizon T = 15. 4. Present graphs of the price trajectories in the state space. 5. Present graphs of the price trajectories as functions of time.
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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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