(a) Consider a two-commodity world, where an individual's money income is determinedby the value of his endowment. Suppose this individual initially has an endowmentof good 1, which is less than what he consumes. Let there now be an increase in theprice of good 1. Analyse the implications of this in the context of the individual'soptimal choices.

A two-commodity world is where people consume only two goods that might interest be capital goods or…

Answered: (a) Consider a two-commodity world,…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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a) According to Adam Smith's Model, the prices of goods depend on the relative value of labour used to produce the goods. Therefore, if it takes 7 hours to produce 35 shirts, and 9 heeirs to produce D socks, then I shirt should trade for how many socks? b) Suppose Caitlan has preferences for Watermelons (W) and Bananas (B) given by: Utility V3.85 W B Caitlan wishes to generate X utils from the consumption of watermelons and bananas. Let X A+2C+30. Suppose she can only buy bananas in sets of 5, 10, 15 or 22 units. How many units of watermelons should she consume in each case to ensure that she does not change her desired utility level? c) Suppose that the supply curve for the labour to a firm is given by L=X*w and the marginal expense of labour curve is given by MEL = L/ (X/2) where w is the market wage. Suppose also that the firm's demand for labour (marginal revenue product) curve is given by L-Y-X*MRPL Let X-D and let Y 500 + B. i) If the firm acts as a monopsonist, how many workers…
Problem 1 Consider the economy with capital studied in class. Assume the endowment vector (y, 0). Suppose the production function is f(k) = Vk and u(ci, c2) = In c + In c2. a. Suppose there is no money. Find the equilibrium consumption allocation (ci,). b. Now suppose there is money in this economy. Find the equilibrium consumption allocation %3! c. Let u (y) = u(ci, c) and û(y) = u(êi,2). Calculate the values of u"(y) and û(y) for the values y = 1,5, 10. What is larger, u (y) or û(y)? d. Plot u (y) and û(y) for values of y e [0, 10] on the same graph using different colours or thickness. You can use Maple, Excel, or any other software. %3D
Altruism: now consider the case where each individual cares about the benefit from the museum to the other two. For example, any additional utility to Alice or Bianca is also a utility gain for Claire. Hint: for each person, the total marginal benefit is TMB= MBA+ MBB+MBC Find each person’s optimal number of art works. Who will contribute and how many works of art will be provided?
(a) Examine the view that it is possible to escape from the "impossibility" result of Arrow by making social preferences a function of cardinal utility rather than of individual orderings.
Assume that you are on an island where there are only two commodities—coconuts and pineapples—and you can spend your income only on these two foods. If the price of coconuts is Pc and the price of pineapples is Pp and your income is I, draw a budget constraint, carefully labelling the points on the two axes and where the attainable and unattainable portions of consumption are. Note: you can choose any Pc and Pp that you like—they do not have to be equal. What is the slope of this budget constraint? What is the economic interpretation of the slope? Now, let’s bring a little more structure to this diagram. Let I=£200, Pc=£1 per coconut and Pp=£2 per pineapple. Draw a new diagram using these numbers. Consider these questions: How many coconuts can you buy if you do not buy any pineapples? How many pineapples can you buy if you do not buy any coconuts? What is the slope and what economic information does it give us? Show the point of 100 coconuts and 100 pineapples on your diagram. Can…
QUESTION 35 Following from the model described in the previous question. What is the budgt constraint facing the individual, and what is the optimal condition for individual choices of consumption and fertility? 1 The budget constraint is wt- pn; = C;i The optimal condition is Ct pnt 1 The budget constraint is w, -p= C;; The optimal condition is Ct nt 1 The budget constraint is Wt-p3 Ct; The optimal condition is Ct %3D The budget constraint.is w -p-n;= C; The optimal condition is Ct = Opn;
Question is in attached image, Thank you!
Bartholomew and Agatha are each endowed with 15 units of food and 15 units of clothing. For Bartholomew, the two goods are perfect substitutes, i.e., U³ = FB + C³. For Agatha, the two goods are perfect complements, i.e., Uª = min{F^, 2C^}. Do all of the following in just one graph or chart: Draw an Edgeworth box (with the correct dimensions). Note: Assign clothing on the vertical axis (label it "C") and food on the horizontal axis (label it "F"). Assign Agatha's origin at the lower left corner, while Bartholomew's at the upper right. Plot the endowment point and label it "w". Plot Agatha's indifference curve that passes through w. Label the indifference curve "Agatha". Plot Bartholomew's indifference curve that passes through w. Label the indifference curve "Bartholomew". Shade the region or set of all Pareto-improving allocations relative to w. What is its shape? Draw the contract curve and answer this: Is it a straight line or not? [Hint: The contract curve in this case does not need…
For a consumer with a utility function u=3x^2y^2 when px=3 and py=4, find the consumption levels that maximize his utility under the $120 budget constraint. What is the maximum benefit?
6.
Q16 Pareto optimality refers to the maximum efficient allocation of economic resources such that there is no way that one's wealth another person worse off: this statement is choices - irrelevant -conditionally true -always true -always false
We took the case of two goods model. Both of the goods are normal. Explain below the Income Consumption Curve (ICC) in your own words?

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