9. Consider an Edgeworth box economy with two consumers, whose utility func-tions and endowments areu'(x},x}) = (x}Xx})}(5,5)In the following, use the normalization p2 = 1.(a) Find the competitive equilibrium price.(b) State the first fundamental theorem of welfare and verify that it holds inthis economy.(e) Consider the allocation ĩ = (x',) = (2,3), (8, 7). Show whether this allo-cation can supported as an equilibrium with transfers.(d) State the second fundamental theorem of welfare, and briefly discuss whetherthe result in part (c) conform with or violate this theorem.3.

Competitive equilibrium is a condition where profit-boosting makers and utility-expanding shoppers…

9. Consider an Edgeworth box economy with two consumers, whose utility fune- tions and endowments are u'cx.) = (x}Xx}»! =(5,5) In the following, use the normalization p2 =1. (a) Find the competitive equilibrium price. (b) State the first fundamental theorem of welfare and verify that it holds in this economy. (c) Consider the allocation = (2',)= (2,3), (8,7). Show whether this allo- cation can supported as an equilibrium with transfers.

9. Consider an Edgeworth box economy with two consumers, whose utility fune- tions and endowments are u'cx.) = (x}Xx}»! =(5,5) In the following, use the normalization p2 =1. (a) Find the competitive equilibrium price. (b) State the first fundamental theorem of welfare and verify that it holds in this economy. (c) Consider the allocation = (2',)= (2,3), (8,7). Show whether this allo- cation can supported as an equilibrium with transfers.

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter6: Consumer Choice And Demand

Section: Chapter Questions

Problem 6QFR

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9. Consider an Edgeworth box economy with two consumers, whose utility func- tions and endowments are e' = (5,5) 2 = (5,5) In the following, use the normalization p2 = 1. (a) Find the competitive equilibrium price. (b) State the first fundamental theorem of welfare and verify that it holds in this economy. (e) Consider the allocation ã = (x',) = (2,3), (8, 7). Show whether this allo- cation can supported as an equilibrium with transfers. (d) State the second fundamental theorem of welfare, and briefly discuss whether the result in part (c) conform with or violate this theorem.
Suppose consumer consume two goods. Can both goods be inferior? Can one of the goods be inferior? Explain your reasoning clearly. 19
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7) Suppose that upon solving for optimal bundles of hamburgers and french fries, we determine that when the price of hamburgers is $5 and the price of fries is $2, that we consume 2 hamburgers and 5 orders of fries. Suppose further that, upon changing the price of fries to $4, we only consume 3 orders of fries. Draw out a demand curve for fries, labeling two points. This is not a trick question, this one is supposed to be easy.
Let the following table represent the total utility of a given consumer,In the cardinal utility approach. A) Calculate the MUx and MUy and fill the table in the 4th and 5th rows. B) If the two products (X&Y) are free goods how many of X and Y should the cons consumer take to maximize utility? C) What is the maximum utility of X and Y if they are free?. D) Assuming the consumer has any amount of money (enough budget) how many of X and Y should the consumer buy, to maximize utility? E) What is the total utility of X and Y? F) Let now price of X is 4 birr per unit and price of Y is 2 birr per unit and budget of the consumer for consumption of X and Y is 20 birr. Given budget constraint how many of X and Y should the consumer buy to maximize utility? G) What are the total utility of X and Y