Consider a small country with two individuals, Anita and Babar, and two goods, corn (C) and chicken (H). Anita and Babar have utility functions given by A U = 0.21n C + 0.8 in H, U B = 0.8 in C + 0.2 in H. The economy as a whole is endowed with 100 units of corn and 50 units of chicken. (a) Solve for the marginal rates of substitution between corn and chicken for Anita and Babar. Show the condition that represents allocative efficiency in C and H.
Consider a small country with two individuals, Anita and Babar, and two goods, corn (C) and chicken (H). Anita and Babar have utility functions given by A U = 0.21n C + 0.8 in H, U B = 0.8 in C + 0.2 in H. The economy as a whole is endowed with 100 units of corn and 50 units of chicken. (a) Solve for the marginal rates of substitution between corn and chicken for Anita and Babar. Show the condition that represents allocative efficiency in C and H.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Consider a small country with two individuals,
Anita and Babar, and two goods, corn (C) and
chicken (H). Anita and Babar have utility
functions given by
A U = 0.21n C + 0.8 in H,
U
B = 0.8 in C + 0.2 in H.
The economy as a whole is endowed with
100 units of corn and 50 units of chicken.
(a) Solve for the marginal rates of substitution
between corn and chicken for Anita and
Babar. Show the condition that represents
(b) Derive Anita and Babar's demands for
C and H as a function of prices (P) and Income (I)
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