Consider a economy with three goods, a, b and c. The total supply consists 150a, 180b and 120c. There are three consumers 1,2,3 They have the followiing preferences:

u1(a,b,c)=a

u2(a,b,c)=a+b

u3(a,b,c)=1+c

a) Identify a competitive equilibrium from equal incomes in which the price of a and c are equal.

b) Find the egalitarian equivalent allocation(EEA is one that gives each agent the same utility as giving the one a fraction x of total supply, for x as large as possible)

Answer rating: 100% (QA)

a In this economy there are three goods a b and c that are each sold at their marginal cost The total supply of each good is equal to its price The pr... View the full answer