Exchange (L8&L9)

Question 1

pareto efficiency

Answer 1

can’t make someone better off without making someone else worse off
when slops are the same for cobb douglas
MRSa=MRSb
X2A/X1A= X2B/X1B

Question 2

pareto dominates when

Answer 2

every consumer has weakly higher utility but one has strictly higher utility

Question 3

feasible allocations

Answer 3

must be inside the edgeworth box (total endowments)

Question 4

walrasian equilibrium

Answer 4

no excess demand
demand of consumer 1 = -consumer 2 demand
gross demand = endowment
A wants to sell exactly how much B wants to buy and vice versa

Question 5

how to find equilbria

Answer 5

if one market has 0 excess demand, the other one will also be 0 with more than 2 markets, you care about k-1 markets
set one good as a numeraire good (find price ratio, making a price=1)
find demand using formula
so given p1=1, p2 is whatever you rearrange to get

Question 6

Net demand

Answer 6

X-W
Gross demand- endowments
Sum of net demands is 0, to balance if they buy good 1 they’re a seller of good 2

Question 7

Calculating gross demand

Answer 7

1/2 M/P1