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Winter2020
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Consider a pure exchange economy with two goods and two consumers, Rand J with utility functions UR(x,y) = x²y and U,(x,y) = x4y respectively, and endowments of wR = (2,1) and wj = (1,2). Compute the competitive equilibrium for this economy. Calculate the transfers ta and t, needed to support the allocation (XR, YR) = (1,1.5) and (xj. y.) = (2,1.5) as an equilibrium with transfers.
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