2. Consider an economy with two agents and two commodities. Consumers' preferencesare represented by the following utility functionsu₁(x,x) = (x²) ¹ (x²) ½u₂(x², x²) = x² + x².Consumers' initial endowments aree² = (6,4).Note: You can normalize the price of one good to 1 at any point when solving thisquestion.e¹ = (10,2)(a) Draw the Edgeworth box that represents this economy. Clearly indicate the sizeof the box (i.e. the maximal feasible amounts of good 1 and good 2). Show thelocation of the initial endowment and draw the indifference curve of each consumerthat passes through the initial endowment.

Given Agent 1's utility function: u1x11,x21=x111/2x211/2 ......(1) Agent 2's utility…

Consider an economy with two agents and two commodities. Consumers' preferences are represented by the following utility functions u₁(x¹, x² ) = (x²) ¹ (x¹² ) ² u₂(x,x) = x² + x². Consumers' initial endowments are e¹ = (10,2) Note: You can normalize the price of one good to 1 at any point when solving this question. e² = (6,4). (a) Draw the Edgeworth box that represents this economy. Clearly indicate the size of the box (i.e. the maximal feasible amounts of good 1 and good 2). Show the location of the initial endowment and draw the indifference curve of each consumer that passes through the initial endowment.

Consider an economy with two agents and two commodities. Consumers' preferences are represented by the following utility functions u₁(x¹, x² ) = (x²) ¹ (x¹² ) ² u₂(x,x) = x² + x². Consumers' initial endowments are e¹ = (10,2) Note: You can normalize the price of one good to 1 at any point when solving this question. e² = (6,4). (a) Draw the Edgeworth box that represents this economy. Clearly indicate the size of the box (i.e. the maximal feasible amounts of good 1 and good 2). Show the location of the initial endowment and draw the indifference curve of each consumer that passes through the initial endowment.

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section: Chapter Questions

Problem 3SQP

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