Suppose there are two consumers, A and B, and two goods, X and Y. Consumer A is givenan initial endowment of 3 units of good X and 5 units of good Y. Consumer B is given aninitial endowment of 5 units of good X and 3 units of good Y. Consumer A's utility functionis given by:UA(X,Y)= X + 4Y,and consumer B's utility function is given byUB(X,Y)= MIN (X, 2Y).If the prices are Px = 1 and Py = 3, if each consumer sells her initial endowment and buysback her optimal bundle, which of the following statements is true?Group of answer choicesBoth Markets are in EquilibriumThere is Excess Demand in the Market for Good X = 2.4There is Excess Demand in the Market for Good Y = 0.8There is Excess Supply in the Market for Good Y = 1.6There is Excess Supply in the Market for Good X = 1.6E

In economics, the utility function measures the welfare or satisfaction of a consumer as a function…

Both Markets are in Equilibrium There is Excess Demand in the Market for Good X = 2.4 There is Excess Demand in the Market for Good Y = 0.8 There is Excess Supply in the Market for Good Y = 1.6 There is Excess Supply in the Market for Good X = 1.6

Both Markets are in Equilibrium There is Excess Demand in the Market for Good X = 2.4 There is Excess Demand in the Market for Good Y = 0.8 There is Excess Supply in the Market for Good Y = 1.6 There is Excess Supply in the Market for Good X = 1.6

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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