Consider a world made up of two countries, Oceania and Eurasia. There are two goods in this world: coal used for heating, and food. Eurasia has utility over these goods given by UE(IE, TOXA) = (25) 1+ (25) 1. Here TE is the amount of coal consumed in Eurasia, $ is the amount of food consumed in Eurasia. Eurasia is endowed with 4 units of coal and zero units of food. Oceania is adversely affected by pollution when Eurasia burns coal. This is reflected in the utility function of Oceania, which is ":") = (29) :+ (29) ; -2(x5) ;. Here ? is the amount of coal consumed in Oceania, and a? is the amount of food consumed in Oceania. Note, Oceania does not choose 25. Oceania is endowed with 0 units of coal and 4 units of food. Throughout this problem, treat food as the numeraire, and set pp = 1. You may assume all utility functions are quasi-concave. 1. Is the allocation x5 = 3, ap = 1,29 = 1, x2 = 3, Pareto optimal 2. Find Oceania's utility maximizing demand for Coal as a function of the unit price of coal, 3. Find Eurasia's utility maximizing demand for Coal as a function of the unit price of coal, Po. 4. Do po = 2, pp = 1, 25 = 4, xp = 16, ag = ] and ap = $ form a(Walrasian Equilibrium 5. Find a Walrasian Equilibrium of this economy (regardless of your answer in part (d) , this equilibrium must be different than the candidate equilibrium described in part (d) Is the Walrasian Equilibrium allocation that you found in part (e) a Pareto optimal allocation? If you answer 'yes' you must explain why the Walrasian equilibrium allocation you found in part (e) is Pareto optimal. If you answer no you must justify your answer by providing an allocation that makes each country better off compared to the allocation in part (e)
Dont write definitions.
Give me specific process of calculation