Under what condition can the agent afford to consume

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Reference no: EM13237071

Consider a static, Arrow-Debreu economy with N=2 states. Suppose that the market is complete and let P and 1-P be the price of the two Arrow-Debreu securities, b(1)=(1, 0), and b(2)=(0, 1), respectively. If an agent has income (1, 2), what is the market value of her income? Under what condition can the agent afford to consume 1.5 in both states by trading financial securities?

Reference no: EM13237071

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