question archive Consider a two-person, two-good economy (say, apples and bananas) without production
Consider a two-person, two-good economy (say, apples and bananas) without production
Subject:EconomicsPrice: Bought3
Consider a two-person, two-good economy (say, apples and bananas) without production. Both consumers have identical preferences, given by u(a,b)= a0.2 b1-0.2, where a denotes the consumption of apples, and b the consumption of bananas. Person 1 owns 40 bananas and 20 apples, whereas person 2 owns 20 bananas and 40 apples.
and
For this question, refer back to the data from question 3.
Suppose the government of this economy adopts a Rawlsian approach to welfare economics. That is, the social welfare function they adopt is as follows:
in file below...
Calculate the Socially Optimal allocation for this economy. Can such an allocation be achieved via re-distribution of the endowments?
