7. Sheila and Bruce are going tubing. They brought with them boxes of cereal (x) and bags of pretzels (y). Their utility functions and endowments are given in the table: Sheila Bruce Utility Function Inxs+ in ys 0.5lnxB+ InyB Endowment (20, 10) (15,45) Suppose that Sheila and Bruce set up competitive markets for cereal (x) and pretzels (y). Let Px be the price of cereal and Py the price of pretzels. a) Write the two equations that define Bruce's best bundle of cereal and pretzels. Solve for his best bundle (i.e. his Marshallian Demands) b) Use his Marshallian Demands to write Bruce's net demands for cereal (x) and pretzels (y). c) Do the same for Sheila (find her Marshallian Demands and her net demands for cereal and pretzels)

7. Sheila and Bruce are going tubing. They brought with them boxes of cereal (x) and bags of pretzels (y). Their utility functions and endowments are given in the table: Sheila Bruce Utility Function Inxs+ in ys 0.5lnxB+ InyB Endowment (20, 10) (15,45) Suppose that Sheila and Bruce set up competitive markets for cereal (x) and pretzels (y). Let Px be the price of cereal and Py the price of pretzels. a) Write the two equations that define Bruce's best bundle of cereal and pretzels. Solve for his best bundle (i.e. his Marshallian Demands) b) Use his Marshallian Demands to write Bruce's net demands for cereal (x) and pretzels (y). c) Do the same for Sheila (find her Marshallian Demands and her net demands for cereal and pretzels)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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