Endowments (L7) Flashcards
1
Q
value of bundle in terms of endowment
A
p1w1+p2w2=m
2
Q
how to know if you are a buyer/seller of endowments
A
if you demand more than endowments, you’re a buyer
if you demand less than endowments, you’re a seller
net demand (difference between gross demand & w1)
3
Q
finding gross demand
A
use lagrange to find demand of x1, sub w1 as income
4
Q
denote fixed endowment
A
x1(p1,p2)=x1(p1,p2,p1w1+p2w2)
5
Q
finding net demand of a good
A
1/2(p1/p2 w2 -w1)
6
Q
How do we know allocations are Pareto efficient
A
When preferences are monotonic with walrasian, can tell by cobb Douglas
7
Q
Pareto efficient
A
MRSA=MRSB
8
Q
Feasibility
A
x2/ x1 = endowment of person one - x2 / endowment of person 2 - x1
