Question

Consumer A has utility function U^(c₁.₂) Inc; + BA Inc. Consumer B has utility function U^(₁.2) Inc+pInc; Both consumers have equal endowments in period 1 and period 2 (y = y = y₁ = y). In equilibrium, consumer A will borrow from consumer 8 only if Oa. Consumer A will always borrow from consumer B in equilibrium O b. Consumer A will never borrow from consumer B in equilibrium OC. BA= BR Od. BA Ba

Answer 1

Answer:

Consumer A has utility function U^(c₁.₂) Inc; + BA Inc. Consumer B has utility function U^(₁.2 ... -

Explanation:

See the Edgeworth box below, the black line represents A's indifference curve, while the blue line represents B's indifference curve.

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b) At ...

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