Question: question 2 a) A planner in a small, open economy has a utility function U = xix2 and production takes place according to the production

question 2

a) A planner in a small, open economy has a utility function U = xix2 and production takes place according to the production functions y1 = 10L1 - 0.5Li 3'2 = 1012 L22 The world prices of the goods are 191 = 10 and p2 = 5. The total amount of labour available in the economy is 5 units. (i) Formulate the Lagrange equation

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4. It is the principle of equality (according to very specific criteria of equality) that is crucial.