3. Sheila and Bruce are going to the park. They are bringing a total of 18 ounces of chips (x) and 18 ounces of pretzels (y). Sheila and Bruce have preferences that can be represented by: US(x,y) = 3lnxs + lnys and UB(x,y) = lnxB+lny. Consider the equal division of the endowment where each receives 9 ounces of each good. a) An allocation in an exchange economy is called envy free if each individual prefers his or her own allocation of goods to the allocation received by any other individual. Is the equal division envy free? b) Is the equal division a Pareto efficient allocation of chips and pretzels? c) Given their marginal rates of substitution at the equal division allocation who values chips more highly? What will be the pattern of trade associated with every mutually beneficial trade?

3. Sheila and Bruce are going to the park. They are bringing a total of 18 ounces of chips (x) and 18 ounces of pretzels (y). Sheila and Bruce have preferences that can be represented by: US(x,y) = 3lnxs + lnys and UB(x,y) = lnxB+lny. Consider the equal division of the endowment where each receives 9 ounces of each good. a) An allocation in an exchange economy is called envy free if each individual prefers his or her own allocation of goods to the allocation received by any other individual. Is the equal division envy free? b) Is the equal division a Pareto efficient allocation of chips and pretzels? c) Given their marginal rates of substitution at the equal division allocation who values chips more highly? What will be the pattern of trade associated with every mutually beneficial trade?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Refer to the above diagram. In this instance: Question 5 options: the BC line is diagonal because the amount spent on both goods is less or equal to income. the consumer will find that every point along the I3 line is outside the budget constraint. the consumer will find the highest utility where x and y just touch the I2 line. the consumer will find the highest utility where x and y just touch the I2 line.
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3. Jane is currently consuming 4 glasses of milk and 10 cookies, while Betty is consuming 9 glasses of milk and 3 cookies. Jane views milk and cookies as perfect substitutes (her MRS is 1), while Betty prefers cookies to milk and is willing to give up 3 glasses of milk to get 1 cookie. Is the current allocation of milk and cookies Pareto efficient? Explain with use of a diagram.
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Tom has 500 dollars to spend on two goods, good 1 and good 2. The seller of good 1 offers Tom the following deal: For every three units (of good 1) you buy, you will get the fourth unit for free. Determine how many units of good 1 Tom will end up with if the price of good 1 is 3, the price of good 2 is 8, Tom spends all his income on the two goods and buys 9 units of good 2. Then enter the value below.
6. Sarah and Clare have identical utility functions U = 5 In(x)+y: Sarah starts out with 16 units of x and 5 units of y and Claire starts out with 4 units of x and 15 units of y. a. Draw the Edgeworth box, label the endowment point and sketch some "normal" indifference curves through the endowment point. Shade the region where trades are possible. b. Find Sarah and Claire's Marshallian demands as a function of the price of x, price of y and their endowments. c. Find the market clearing price and how much x and y the two consumer after trading. d. Who is happier after trading?
Suppose that Abe and his brother Moe are lost in the desert and are in need of guidance to find an oasis. They can seek such guidance from either a burning bush or a golden calf. Abe has the following preferences: • If Moe chooses to talk to the golden calf, Abe prefers the outcome where he to chooses to talk to the golden calf than talk to the burning bush. • If Moe chooses to talk to the burning bush, Abe is indifferent between the outcome where he choose to talk to the burning bush and the outcome where he chooses to talk to the golden calf. • Regardless of his own decision, Abe prefers all outcomes where Moe talks to the burning bush than if he chose to talk to the golden calf. Moe has the following preferences: • If Abe chooses to talk to the golden calf, Moe prefers the outcome where he chooses to talk to the golden calf than talking to the burning bush. • If Abe chooses to talk to the burning bush, Moe prefers the outcome where he chooses to talk to the golden calf than talking…
Grapes and bananas are perfect complements for Jane and Betty. Jane eats one grape per three bananas.; Betty eats three grapes per one banana. Once they go to sports for hours, Jane had 20 grapes and 10 bananas and Betty had 10 grapes and 20 bananas. (assume that grapes and bananas can be divided into half) 1.Show all Pareto optimal allocations of grapes and bananas between Jane and Betty in the Edgeworth Box. Draw a bunch of indifference curves and look for tangencies.
Bucky has $20 to spend on bowling and billiards. The prices of bowling and billiards are $4 and $1 por game, respectively. Assume he has a voucher for two free games of bowling Suppose bowling is the "X" good and billiards are the "Y" good How many games of bowling can Bucky afford? How many games of billiards can Bucky afford? Where is the "link" in Bucky's budget constraint where opportunity cost of billiards in terms of bowling games changes? (This should be answered as quantity of bowling games, quantity of billiards games)
John has $300 as income and he uses his income only for apples and bananas. If he uses his income only for apples, he can buy 10 pounds. If he uses his income only for bananas, he can buy 15 pounds. Which one is the correct formula for his budget constraint when X=pounds of apples, Y=pounds of bananas and the prices are per pound? a) More information is needed to answer the question. b) 15X + 10Y = 300 c) 10X + 15Y = 300 d) 20X + 30Y = 300 e) 30X + 20Y = 300