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Starting from a competitive equilibrium allocation
Course:- Business Economics
Reference No.:- EM131005502




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Suppose that two consumers care only about the goods that they own. (The goods are private for them.) Starting from a competitive equilibrium allocation, is it possible for both consumers to be made simultaneously better off by trading with each other? Show that your answer is correct. Illustrate your answer with graphs showing possible trades between the two consumers. Explain what it is in your graphs that shows that the allocation the consumers start from is a competitive equilibrium allocation.




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