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6.2. For the following two-person two-commodity pure exchange economy, the price of good y is...

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Accounting

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6.2. For the following two-person two-commodity pure exchange economy, the price of good y is normalized to $1. The table below gives the util- ity functions, endowments, and demands for goods x and y, where mi denotes the value of consumer i's endowment, i = a,b. Person i wi ri y? u x" + ln ya (1,4) xb + 2 In yl (3,2) (m / px) 1 Px/py (mb / px) 2 2px/py b (a) Draw the set of interior Pareto efficient allocations in an Edge- worth box for this economy. (b) Draw the entire contract curve for this economy, including the corner Pareto efficient allocations. (c) Calculate the Walras equilibrium price x and Walras allocation ((99,99), (fb, g')). Check that the Walras allocation is Pareto effi- cient algebraically

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