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Consider an exchange economy with A and B. For the endowment, A has (x,y) = (10,40) and B has (x,y) (20,5). Assume that both A and B have a Cobb Douglas utility function u(x,y) = xy. Say A proposes to give B 5 units of good y. What is the most x B is willing to give to A in return? 2.5 5 10 12.5 Question 2 1 pts Consider the exchange economy in question 1 again. If the price of x is $4 and the price of y is $8, then consumer A has an income of and A's optimal basket has x* = units. 320; 40 320; 45 360; 45 360; 40

Consider an exchange economy with A and B. For the endowment, A has (x,y) = (10,40) and B has (x,y) (20,5). Assume that both A and B have a Cobb Douglas utility function u(x,y) = xy. Say A proposes to give B 5 units of good y. What is the most x B is willing to give to A in return? 2.5 5 10 12.5 Question 2 1 pts Consider the exchange economy in question 1 again. If the price of x is $4 and the price of y is $8, then consumer A has an income of and A's optimal basket has x* = units. 320; 40 320; 45 360; 45 360; 40

Economics (MindTap Course List)
Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter1: What Economics Is About
Section: Chapter Questions
Problem 19QP
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Consider an exchange economy with A and B. For the endowment, A has (x,y) = (10,40) and B has (x,y) (20,5). Assume that both A and B have a Cobb Douglas utility function u(x,y) = xy. Say A proposes to give B 5 units of good y. What is the most x B is willing to give to A in return? 2.5 5 10 12.5 Question 2 1 pts Consider the exchange economy in question 1 again. If the price of x is $4 and the price of y is $8, then consumer A has an income of and A's optimal basket has x* = units. 320; 40 320; 45 360; 45 360; 40
Transcribed Image Text:Consider an exchange economy with A and B. For the endowment, A has (x,y) = (10,40) and B has (x,y) (20,5). Assume that both A and B have a Cobb Douglas utility function u(x,y) = xy. Say A proposes to give B 5 units of good y. What is the most x B is willing to give to A in return? 2.5 5 10 12.5 Question 2 1 pts Consider the exchange economy in question 1 again. If the price of x is $4 and the price of y is $8, then consumer A has an income of and A's optimal basket has x* = units. 320; 40 320; 45 360; 45 360; 40
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