Suppose We Live in an Exchange Economy with Two Goods

question 24

Essay

Suppose we live in an exchange economy with two goods.I own 50 of both goods, and you own 250 of both goods.My tastes are captured by the utility function and yours are captured by the utility function .
a.Calculate the competitive equilibrium price.
b.How much do each of us consume of good 1 in equilibrium?
c.Suppose the government transfers 100 units of your good 1 endowment to me.How is your answer to (a) and (b) affected?
d.Suppose the government instead transfers 100 units of good 2 from you to me.How is your answer to (a) and (b) affected?
e.Do you think your answers to (c) and (d) generally hold for most types of tastes -- or do you think they arise because of some specific feature of these tastes?

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Definitions:

New Environmental Paradigm

A view in environmental sociology proposing a shift from the anthropocentric view that human needs are paramount, to one recognizing interconnected ecosystems and the necessity of sustainable interaction.

Anthropocentric View

A perspective that regards humans as the central or most significant entities in the universe.

Anthropocene

A new geological era resulting from the consequences of human activities on Earth.

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