An Edgeworth box is shown for individuals M and N. The endowment point 'A' represents the initial allocation of these two goods to individuals M and N. ON 1.) Use the line drawing tool to draw a price line that represents a competitive equilibrium between individuals M and N. Label this line 'pR. 2.) Use the point drawing tool to locate this competitive equilibrium. Label this point 'R'. Carefully follow the instructions above, and only draw the required objects. IN Good X IN OM Apo09

An Edgeworth box is shown for individuals M and N. The endowment point 'A' represents the initial allocation of these two goods to individuals M and N. ON 1.) Use the line drawing tool to draw a price line that represents a competitive equilibrium between individuals M and N. Label this line 'pR. 2.) Use the point drawing tool to locate this competitive equilibrium. Label this point 'R'. Carefully follow the instructions above, and only draw the required objects. IN Good X IN OM Apo09

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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There are 40 people living in a village each having preference over apples andshirts represented by U(a,b) = a1/3s2/3, where a and s are amount of applesin pounds and shirts consumed, respectively. The price of a shirt is $10. Each villager has $300 income. Apples are supplied to the village by a farmer, whose supply function is S(pa) = 1000pa.Part a1What is the equilibrium price of apples? How many pounds of apples does eachvillager consume?Part a2What is the aggregate net consumer surplus at the equilibrium?Part a3What is the price elasticity of demand at the equilibrium?Part b1Suppose 50 more people move in to the village. What is the equilibrium pricenow? Part b2Are consumers better or worse off now? Why? If a consumer is worse off, byhow much additional income he/she needs to be compensated in order to be aswell off as in Part a.
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2. General Equilibrium Consider a market with two goods, x and z, and two consumers, A and B. The utility functions for consumers A and B are as follows UA ÜB 2 1 == XBZB and the initial endowments for each consumer are @ eA = (4,2) еB = (2,6) where consumer B is endowed with 2 unit of good x and 6 units of good z, respectively. a) Draw the Edgeworth Box (Don't worry about the shape of the utility curves. Just pick a general shape that we have used before). b) Derive the contract curve.
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