Question:
Consider a pure exchange economy with two goods x and y. Ravi and Suraj are two individuals with utility functions $U_R = \beta log(xy)$ and $U_s = (x/y)^{\alpha},$ respectively. The endowments are $x_R$ and $y_R$ for Ravi and $x_s$ and $y_s$ for Suraj such that $x_R$+$x_s$ = A and $y_R + y_s= B$. Then their contract curve is
Consider a pure exchange economy with two goods x and y. Ravi and Suraj are two individuals with utility functions $U_R = \beta log(xy)$ and $U_s = (x/y)^{\alpha},$ respectively. The endowments are $x_R$ and $y_R$ for Ravi and $x_s$ and $y_s$ for Suraj such that $x_R$+$x_s$ = A and $y_R + y_s= B$. Then their contract curve is
Updated On: Oct 1, 2024
- $Ay_R$ -$Bx_R$ = 0
- $Ay_R$ + $Bx_R$ - $2Y_RX_R$ = 0
- $Ay_R$ + $Bx_R$ -$Y_RX_R$= 0
- $Ay_R$ - $Bx_R$ + $2Y_RX_R$= 0
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The Correct Option is B
Solution and Explanation
The correct option is (B): $Ay_R$ + $Bx_R$ - $2Y_RX_R$ = 0
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