There are two agents in an exchange economy with two goods. Agent 1 has an initial...

There are two agents in an exchange economy with two goods. Agent 1 has an initial endowment vector ω1 = (2, 0) and a utility function u1 = x1 + x21/2. Agent 2 has an initial endowment vector ω2 = (0, 2) and a utility function u2 = x1 + x21/3. If we change the initial endowments for the two agents so that both have the same initial endowment, ω1 = (1, 1) = ω2, what would happen to the Walrasian General Equilibrium price vector? Briefly explain.

Expert Solution

Rahul Sunny answered 2 years ago

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