Question: Problem 5. Consider a consumer with utility function u(21, 12) = TIT2. a) Find the marginal rate of substitution at bundle (2,3) for this consumer


Problem 5. Consider a consumer with utility function u(21, 12) = TIT2. a) Find the marginal rate of substitution at bundle (2,3) for this consumer (with utility function u). b) Consider the second consumer with utility function v(31, 12) = 215;. As- sume both consumers currently have endowment of 4 units of good 1 (r1) and 8 units of good 2 (x2). If they allowed to exchange goods, can you find an example of trade (exchange of goods) that makes both consumer better off? (Hint: Use marginal rate of substitution.)
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