5 Questions
What is the utility function for both agents?
$u(c) = ln(c)$
What is the optimal consumption for agent a in state i, given the set of state prices $q_1, ..., q_N$?
$c_{a,i}^* = rac{ ext{π}_i q_i}{ ext{Σ} q_i (z_i - 1 + h_i)}$
What is the income of agent b in state i?
$y(b)_i = z_i - 1 - h_i$
What is the market-clearing condition to solve for the price $q_i$ as a function of $z_i$ and $ ext{π}_i$?
$q_i = ext{π}_i z_i k$
What is the optimal consumption for agent b in state i, given the set of state prices $q_1, ..., q_N$?
$c_{b,i}^* = rac{ ext{π}_i q_i}{ ext{Σ} q_i (z_i - 1 - h_i)}$
Test your understanding of the Arrow-Debreu economy with N states and two agents. Explore the concept of incomes for each agent across different states and analyze the variables z and h. Practice solving for the given variables and their implications in this economic model.
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