Question: Solve this a and b General Equilibrium and Exchange - 4 points Consider an economy with two consumers (A and B) and two goods (X,

Solve this a and b

Solve this a and b General Equilibrium and Exchange - 4 points

General Equilibrium and Exchange - 4 points Consider an economy with two consumers (A and B) and two goods (X, and X2), where the total endowments of Good 1 and Good 2 are respectively W1 = 10 and W2 = 20. Case 1: Both A and B have strictly monotonic preferences for consuming both goods, i.e. their utility increases as the consume more of either good. Case 2: A has a neutral preference for good 1, but monotonic preference for good 2, whereas B has neutral preference for good 2 and monotonic preference for good 1, i.e. A does not get higher utility if he consumes more of good 1 (holding good 2 constant). Similarly, B does not get higher utility if he consumes more of good 2 (holding good 1 constant) a) Is the allocation (XA = 0, X4 = 0), (X = 10, X2 = 20), where B gets all the not? (2 points) endowment of both goods while A gets nothing, efficient in Case 1? Why or why b) Is the allocation (XA = 0, X4 = 0), (XP = 10, X5 = 20), where B gets all the endowment of both goods while A gets nothing, efficient in Case 2? Why or why not? (2 points)

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