1,2,3 only 9.9PROBLEMS 2419.9PROBLEMS1. In an exchange economy between A and B,and some representative indifference curvesfor the two individuals. Show the initialthe initial endowments areendowment, the first competitive equilib-rium, the transfer, and the second competi-tive equilibrium. Also indicate points thatare Pareto optimal and Pareto superior tothe initial endowment.XA = 50, yA = 500,XB = 200, YB20.Their utility functions are5. Now, suppose an advertising campaign in favorood Y persuaded person A to chang pref-erenceUA = (XA)?yAandUB = XB(yB).UA (yA)?.Starting from the ond petitive equi-librium, how would tfunction change the itive equilibriumallocation and p ratio? ( the newsolutions.)6. Can wethe Pareto superiority crion tojudge nether or not the advertising campnmeA or B better off? Why or why not?Find the competitive equilibrium allocationand price ratio.ange in A's utility2. Show that MRS, = MRS, = P,lp, at thecompetitive equilibrium in Problem 1.3. Now, starting from the competitive equilibriumin Problem 1, suppose the government takes100 units of Y away from A and gives it to B.Find the new competitive equilibrium andprice ratio after the transfer of endowments.4. Graph the changes you calculated inProblems 1-3. Sketch in the contract curve

Individual A : Utility function : (xA)2 yA Endowments : (50 , 500 ) Budget Constraint : Px*xA +…

9.9 PROBLEMS 1. In an exchange economy between A and B, and some representative indifference curves for the two individuals. Show the initial endowment, the first competitive equilib- rium, the transfer, and the second competi- tive equilibrium. Also indicate points that are Pareto optimal and Pareto superior to the initial endowment. the initial endowments are XA = 50, yA = 500, XB = 200, yB = 20. Their utility functions are 5. Now, suppose an advertising campaign in favor ood Y persuaded person A to changpref- erence UA = (xA)²ya and %3D Ug = xp(yB)°. %3! UA (yA)?. Find the competitive equilibrium allocation

9.9 PROBLEMS 1. In an exchange economy between A and B, and some representative indifference curves for the two individuals. Show the initial endowment, the first competitive equilib- rium, the transfer, and the second competi- tive equilibrium. Also indicate points that are Pareto optimal and Pareto superior to the initial endowment. the initial endowments are XA = 50, yA = 500, XB = 200, yB = 20. Their utility functions are 5. Now, suppose an advertising campaign in favor ood Y persuaded person A to changpref- erence UA = (xA)²ya and %3D Ug = xp(yB)°. %3! UA (yA)?. Find the competitive equilibrium allocation

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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