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Compute utility of person a at equilibrium

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Reference no: EM13887963

Consider an Edgeworth box economy with utility functions uA(x1, x2) = min(3x1, x2) and uB(x1, x2) = min(x1, 3x2).

(c) Find the unique equilibrium with eA = (4, 0) and eB = (0, 4) and the price of good 1 equal to 1. Compute the utility of person A at the equilibrium.

(d) Find the unique equilibrium with eA = (6, 0) and eB = (0, 4) and the price of good 1 equal to 1.

(e) Compute the utility of person A at the equilibrium of part (b) and compare it with his utility in the equilibrium of part (a). Is there anything paradoxical about your ?nding? Can you explain intuitively why person A's utility level changes in the way that it does from part (a) to part (b)?

Reference no: EM13887963

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