1. Rajesh and Priya consume two goods, apples (A) and mangoes (M). Now suppose that Rajesh's utility function is U*(A, M) = 0.2 In(A) + 0.8 In(M) and Priya's utility funtion is UP (A, M) = 0.8 In(A) + 0.2 In(M).The economy as a whole is endowed with 100 apples and 50 mangoes. Assume for simplicity that the price of apple is normalized to PA = Rs. 1. (i) Solve for the marginal rates of substitution between apples and mangoes for Rajesh and Priya, and show the condition that represents Pareto efficient allocation in apples and mangoes. (ï) Now calculate Rajesh and Priya's demands for A and M as a function of Prices P and Income I. (iii) Assume that Rajesh has 80 apples and 10 mangoes. Using Rajesh and Priya's respective MRS between the two goods, and the given societal endowment, solve for the equilibrium price ratio. Calculate the quantities consumed by each individual in equilibrium. Draw the equilibrium in an Edgeworth Box diagram, making sure to label the equilibrium point and price vector.

1. Rajesh and Priya consume two goods, apples (A) and mangoes (M). Now suppose that Rajesh's utility function is U*(A, M) = 0.2 In(A) + 0.8 In(M) and Priya's utility funtion is UP (A, M) = 0.8 In(A) + 0.2 In(M).The economy as a whole is endowed with 100 apples and 50 mangoes. Assume for simplicity that the price of apple is normalized to PA = Rs. 1. (i) Solve for the marginal rates of substitution between apples and mangoes for Rajesh and Priya, and show the condition that represents Pareto efficient allocation in apples and mangoes. (ï) Now calculate Rajesh and Priya's demands for A and M as a function of Prices P and Income I. (iii) Assume that Rajesh has 80 apples and 10 mangoes. Using Rajesh and Priya's respective MRS between the two goods, and the given societal endowment, solve for the equilibrium price ratio. Calculate the quantities consumed by each individual in equilibrium. Draw the equilibrium in an Edgeworth Box diagram, making sure to label the equilibrium point and price vector.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Question 3: Samantha has $3,000 to spend on two goods: sandwiches and beer. The price of a sandwich is $6 and price of a beer is $5. a) Draw Samantha's budget line. Put beer on the horizontal axis. b) If Samantha's optimal consumption bundle contains 400 sandwiches, how many beer does her optimal consumption bundle contain? Show her optimal consumption in the graph above. c) Draw Samantha's indifference curve crossing her optimal consumption bundle.
Consider Gary's utility function: U(X,Y) = 5 XY, where X and Y are two goods. If the individual consumed 10 units of X and received 250 units of utility, how many units of Y must the individual consume? 5 25 0 10
Suppose a consumer has income of 1000, and buys pizza and coke. The price of pizza is 100 and price of coke is 50. Draw a budget line that represents the set of bundles this individual can afford if they use all their income. (Put movies on the X axis). Label the places where the budget line intercepts each axis and the slope of the line. Suppose that in consumer equilibrium this individual consumes 7 pizza and 6 coke. What rules must hold in consumer equilibrium? Label this bundle in your drawing (call it point “A”). Draw an indifference curve associated with this bundle, and explain how its slope at the equilibrium point relates to the slope of the budget line. Consider the bundle 2 pizza and 8 coke. Label this point. What can you say about the slope of the indifference curve that passes through the point? (For example, is it bigger than, equal to, or smaller than -1?) Now suppose that income goes up to 15oo. Illustrate how the budget constraint will change. If both goods are…
only question 1
1. Suppose you are considering to make a decent holiday dinner. In this year, to be creative, you are thinking to put Copper River Salmon from Alaska (fillet) and fresh Atlantic Lobsters from Maine as entrée on the table. Use the information given, to finish the questions below. (1) The table following provides you total utility (U) and marginal (MU) from consuming Salmon and Lobster. Suppose your total utility of Salmon consumption (U1) is a function of the units (Q as pound or lbs.) of salmon consumed, as U1 =. =/400Q. Similarly, your total utility of Lobster (U2) has the form as units (Q as lbs.) of lobster consumed, which is U2 = /36Q + 40. Now fill the empty spots in the table using the information given. Total utility and marginal utility of Salmon and Lobster. Copper River Salmon Atlantic Lobster Q (Ibs.) U1 MU1 U2 MU2 1 20.00 20.00 8.72 8.72 2 3 4. 6. 7 8 10 (2) With a certain amount of budget, you are going to purchase both Salmon and Lobsters. To maximize your total…
Parts d-h please!
Allen has a utility function U=xy², where x is the consumption of apples and y is the consumption of bananas. Price of apple is 1 and price of bananas is 4. Allen has 30 dollars in his pocket, so how many apples and bananas will he purchase to maximize his utility? options: 10 apples and 5 bananas. 3 apples and 10 bananas. 30 apples only. none of above.
Part A . Consider an economy with the following features. • There are 100 identical consumers that derive utility from consuming three different goods: software, computers, and good m. • Each consumer decision utility function is given by U (c, 8) = 4c¹/48¹/4+m, where e denotes the amount of computers that she consumes, s denotes the amount of software that she consumes, and m denotes the amount of good m that she consumes. cand s must be non-negative, but m can take any real value. • Computers are produced by 20 identical competitive firms with a total cost function given by 10c². • Software is produced by 40 identical competitive firms with a total cost function given by 20s². . QUESTION 1: What are the equilibrium prices for software and comput- ers in equilibrium? Part B • Suppose that there is a positive technology shock in the software industry so that that the new cost function of the software firms becomes 10s². Let C and S denote, respectively, the aggregate level of…
Andy purchases only two goods, apples (a) and kumquats (k). He has an income of $1,000 and can buy apples at $10 per pound and kumquats at $10 per pounc utility function is U(a, k) = 4a + 3k. What is his marginal utility for apples and his marginal utility for kumquats? Andy's marginal utility for apples (MU) is MU, = and his marginal utility for kumquats (MU) is MU, = (Enter your responses as whole numbers.) What bundle of apples and kumquats should he purchase to maximize his utility? Andy should consume apples and kumquats. (Enter your responses as whole numbers.) React tv MacBook Air 80 DI DD F1 F2 F3 F5 F6 F7 F8 F9 F10 @ #3 $ % & 1 2 4 7 8. 9 Q W E Y { A S F G H. J C V M ption command command option .. .. V B
In Philip's world, only two goods give him utility: economics books (B) and computer games (G). His monthly budget is $100, while a book costs $5 and a game costs $10.
Given a Utility function: U(x,y) = 3xy. Suppose the Price of x is 2, and the price of y is 4. Furthermore, suppose I = $16. How much of x and y do you consume?
Assume that, a consumer has $1200 to spend on two goods, X and Y. If the price of a pair of good X is $20 per unit and the price of good Y is $15 each, which of the following combinations that the consumer can purchase from good X and Good Y?