Problem on General equilibrium in an Exchange Economy 1. There are two households in an exchange...

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Problem on General equilibrium in an Exchange Economy 1. There are two households in an exchange economy. These households have preferences that are represented by the following utility functions: U,(x, y) = x05y05 U(x, y) = xy Initial endowments of each household is given by (x, y) = (16,4); (X 2, V) = (8,8) a. Draw the Edworth box and show the initial endowments on the Edworth box. b. Is the initial endowment point Pareto Efficient? Explain. c. Draw the indifference curves that go through the initial endowment. d. Show the set of bundles that are Pareto improvement (that Pareto dominates) the initial endowment on your Edgeworth box. e. Identify a competitive equilibrium for this exchange economy. (Relative prices, and final allocations such that quantity demanded equals quantity supplied for each good at the relative prices. I Q: Problem on General equilibrium in an Exchange Economy 1. There are two households in an exchange economy. These households have preferences that are represented by the following utility functions: U,(x, y) = x05y05 U(x, y) = xy Initial endowments of each household is given by (x, y) = (16,4); (X 2, V) = (8,8) a. Draw the Edworth box and show the initial endowments on the Edworth box. b. Is the initial endowment point Pareto Efficient? Explain. c. Draw the indifference curves that go through the initial endowment. d. Show the set of bundles that are Pareto improvement (that Pareto dominates) the initial endowment on your Edgeworth box. e. Identify a competitive equilibrium for this exchange economy. (Relative prices, and final allocations such that quantity demanded equals quantity supplied for each good at the relative prices. I Q:

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a To draw the Edgeworth box and show the initial endowments we need to create a twodimensional graph where the xaxis represents the quantity of good x ... View the full answer