1. A society has three individuals (A, B, C) and four policy proposals (W, X, Y, Z). Their utility information is given below. A B W 4 5 2 4. 10 Y 3 3 3 5 10 Evaluate and explain your answers. a. Suppose there is a Dictatorial social welfare function (arrow's theorem), which of these policies should be chosen? b. Suppose there is a Weighted social welfare function, which of these policies should be chosen? c. Suppose there is a Utilitarian social welfare function, which of these policies should be chosen? d. Suppose there is a Multiplicative social welfare function, which of these policies should be chosen?

1. A society has three individuals (A, B, C) and four policy proposals (W, X, Y, Z). Their utility information is given below. A B W 4 5 2 4. 10 Y 3 3 3 5 10 Evaluate and explain your answers. a. Suppose there is a Dictatorial social welfare function (arrow's theorem), which of these policies should be chosen? b. Suppose there is a Weighted social welfare function, which of these policies should be chosen? c. Suppose there is a Utilitarian social welfare function, which of these policies should be chosen? d. Suppose there is a Multiplicative social welfare function, which of these policies should be chosen?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2. General Equilibrium Consider a market with two goods, x and z, and two consumers, A and B. The utility functions for consumers A and B are as follows UA ÜB 2 1 == XBZB and the initial endowments for each consumer are @ eA = (4,2) еB = (2,6) where consumer B is endowed with 2 unit of good x and 6 units of good z, respectively. a) Draw the Edgeworth Box (Don't worry about the shape of the utility curves. Just pick a general shape that we have used before). b) Derive the contract curve.
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6. In an Edgeworth box for two consumers, A and B, with endowments of commodities Xa and d Ya are A's endowments, Xb and Yb are B's, and Xo = Xa + Xb, Yo = Ya + Yb), the competitive equilibrium allocation of the two commodities represents a mutual tangency of both consumers' indifference curves with each other and with a common budget line. (a) The conditions require that A and B consume at a point on their budget lines where their indifference curves have the same marginal rate of substitution. and equilibrium for the market as a whole requires that the sum of the individuals' demands for each commodity must equal the totals (Xo and Yo) available. Mathematically express the point of equilibrium, that is, express the above statement with equations in relating each endowments, equilibrium points (Xa, Xb, Ya, Yb), and totals ((Xo, Yo).
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