Friday, 23 January 2015

Can anyone help with a microecon problem?


there 2 consumers, , b following utility functions , endowments:
ua(xa1, xa2) = ln xa1 + (1-a) ln xa2 , endowment wa = (0, 1)

ub(xb1,xb2) = min(xb1,xb2), endowment b wb = (1,0)

find market clearing prices , equilibrium allocation

solutions manual:
x1a = ay=p1 = ap2=p1; x1b = x2b
budget constraint, (p1 +p2)x1b = p1,
x1b =p1=(p1+p2). choose p1 = 1 numeraire , solve
ap2 +1/(1 + p2) = 1.

i'm not sure how answer in solutions manual. can me out? in advance.
 



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