4. Two individuals, Amir and Budi, consume two goods, clothes (X) and shoes (Y). The utility functions for the two individuals are given as: Utility function of Amir, UA = 15X0.25Y0.75 Utility function of Budi, UB = 25X0.5Y0.5 The current price for clothes (Px) is Rp 100,000 and the current price for shoes (PY) is Rp 150,000 a. Determine marginal rate of substitution (MRSXY)between clothes (X) and shoes (Y) for Amir and Budi! Please explain. b. Amir is currently consuming 5 units of clothes (X) and 10 units of shoes (Y), whereas Budi is consuming 12 units of clothes (X) and 8 units of shoes (Y). At this current consumption, have Amir and Budi reached the efficient allocation of clothes and shoes? If they have, explain why. If they have not, calculate the optimal allocation and explain. c. Considering the relative price between of clothes and shoes, at the current consumption, have Amir and Budi reached exchange equilibrium? Please explain d. Use the Edgeworth Box to illustrate the condition in (b) and (c), then explain it clearly. (Note: the graphs in the Edgeworth Box do not necessarily represents the calculation above)
4. Two individuals, Amir and Budi, consume two goods, clothes (X) and shoes (Y). The utility functions for the two individuals are given as:
Utility function of Amir, UA = 15X0.25Y0.75
Utility function of Budi, UB = 25X0.5Y0.5
The current price for clothes (Px) is Rp 100,000 and the current price for shoes (PY) is Rp 150,000
a. Determine marginal rate of substitution (MRSXY)between clothes (X) and shoes (Y) for Amir and Budi! Please explain.
b. Amir is currently consuming 5 units of clothes (X) and 10 units of shoes (Y), whereas Budi is consuming 12 units of clothes (X) and 8 units of shoes (Y). At this current consumption, have Amir and Budi reached the efficient allocation of clothes and shoes? If they have, explain why. If they have not, calculate the optimal allocation and explain.
c. Considering the relative price between of clothes and shoes, at the current consumption, have Amir and Budi reached exchange equilibrium? Please explain
d. Use the Edgeworth Box to illustrate the condition in (b) and (c), then explain it clearly. (Note: the graphs in the Edgeworth Box do not necessarily represents the calculation above)
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