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 Aproposes to give B 5 units of good y. What is the most x B is willing to give to A in return?2.551012.5Question 21 ptsConsider 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 ofand A's optimal basket has x* =units.320; 40320; 45360; 45360; 40

1) Maximum x that B is willing to give A in exchange for 5 units of y In this problem:A has an…

Answered: Consider an exchange economy with A and…

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

See similar textbooks

Similar questions

Consider an exchange economy with two consumers: Charlotte and Dylan, and two goods: quinoa (Q) and raspberries (R). Charlotte has an initial endowment of 83.9 units of quinoa and 99.3 raspberries. Dylan has 112.5 units of quinoa and 77.8 raspberries. Charlotte's utility function is given by Uc=Q¹/² R¹/², where Qc and Re are her consumption of Q and R, respectively. Dylan's utility function is given by Up-Q¹/³ R2/3, where Qp and Rp are his consumption of Q and R, respectively. Suppose that the market price of quinoa is po=2 and the market price of raspberries is pr=1. At these prices, how many units of Q would Dylan want to consume?
For the rest of this question consider a two goods economy where Kim and Jung can trade Ferraris (good x) and VR headsets (good y) with each other. Kim and Jung both enjoy driving Ferraris and having more VR headsets (so more friends can play the same game). They start at the same (high) level of income. Kim has an initial endowment of (x0k, y0k) = (10,30) and Jung has an initial endowment of (x0j, y0j) = (30,10) d) Assume that a social planner could redistribute initial wealth (the amounts of ? and ? that Kim and Jung have). Can they reallocate resources so that Kim and Jung reach the allocation (Xk, Yk) = (20,20) and (Xj, Yj) = (20,20) as a general equilibrium (i.e. post-trade) allocation? Can the social planner redistribute resources to make the allocation where Jung owns all the resources in the economy a general equilibrium allocation?
In an exchange economy, there are two agents, A and B, and there are 320.00 total units of x and 320.00 total units of y. The two consumers have utility functions u^ (x, y) = x²y and u³ (x, y) = xy, respectively. Assume the initial endowments are @A = (160.00, 256.00) and B = (160.00, 64.00). Let p be the price of good y, and let the price of good x be 1. The competitive equilibrium value of p is answer to the nearest two decimals if needed.) (Round your
Consider an exchange economy with two consumers (A and B) and two goods (x1 and x2). Consumer A has an endowment of 5 units of x1 and none of x2, whereas Consumer B has an endowment of 3 units of x1 and 15 units of x2. Consumer A's utility function is given by uA=xA1xA2, and Consumer B's utility function is given by uB=min{xB1,xB2}. Both goods are traded in competitive markets. Find the competitive equilibrium price for x2, assuming p1=1.
D2)
A and B consume only two goods, cider (C) and dumplings (D). A has an initial endowment of 10 bottles of C and 30 of D. Bob has an initial endowment of 50 bottles of cider and 50 dumplings. Alice’s utility function is uA(CA,DA) = 9ln(CA) + 10ln(DA), where CA and DA represent consumption of C and D, respectively. B’s utility function is uB(CB,DB) = CBXDB, where CB and DB denote B's consumption of C and D. a) Find the competitive equilibrium, i.e. the price ratio, of this exchange economy and the resulting equilibrium allocation. b) Find the expression of the contract curve for this economy and use your answer to check that the equilibrium allocation you found in (b) is indeed Pareto optimal.
Jack Sparrow and his wife consume wine (W) and books (B). Jack Sparrow's utility function is Ujack(W, B) = W. His wife's utility function is Uwife(W, B) = B. Jack's endowment is 17 bottles of wine and 5 books and Jack's wife's endowment is 20 bottles of wine and 14 books. In the Edgeworth box, Jack's consumption is measured from the lower left corner, and his wife's from the upper right corner of the box; the wine is on the horizontal axis and books are on the vertical axis. Therefore, in an Edgeworth box for Jack and his wife, there is only one Pareto Optimal allocation that is located in the top left corner of the box. True or False? Please submit 1 if True and O if False.
Elizabeth Swann and her husband consume wine (W) and books (B). Elizabeth's utility function is UE(W, B) = W. Her husband's utility function is UH(W, B) = W. Elizabeth's endowment is 16 bottles of wine and 5 books and her husband's endowment is 19 bottles of wine and 14 books. In the Edgeworth box, Elizabeth's consumption is measured from the lower left corner, and her husband's from the upper right corner of the box; the wine is on the horizontal axis and books are on the vertical axis. Therefore, in an Edgeworth box for Elizabeth and her husband, any allocation is Pareto Optimal. True or False? Please submit 1 if True and O if False.
Sarah and Andrew are two traders in a pure exchange economic with two goods, Bikes (B) and Computers (C). Sarah's preferences are described by the Cobb-Douglas Utility function: U, = B!³ C?3 1/3 S. Andrew's preferences are given by: UA = B}{²C}2 ´A Assume the price of Bikes is 1 and the price of computers is p. The initial endowments are BA = 10, Bs = 20, CA = 20 and Cs= 10. What is the equilibrium price of computers relative to bikes (p)? %3D %D
I need help with this homework problem. Suppose there are two consumers, A and B. The utility functions of each consumer are given by: UA(X,Y) = (X^1/2)*(Y^1/2) UB(X,Y) = X + Y The initial endowments are: A: X = 8; Y = 3 B: X = 4; Y = 5 What is the marginal rate of substitution for consumer A at the initial allocation? What is the marginal rate of substitution for consumer B at the initial allocation? Is the initial allocation Pareto Efficient?
An exchange economy consists of two individuals and two goods. The two individuals have the following Leontief utility functions: Person 1: U1(x1, y1) = 3x1 + y1 Person 2: U2(x2, y2) = x2 + 2y2 Person 1 has an endowment of e1 = (3, 2). Person 2’s endowment is e1 = (3, 4). In an Edgeworth Box diagram, show which allocations are in the core. Describe the set of Pareto optimal allocations (i.e. the contract curve) in the Edgeworth Box. Illustrate the contract curve in an Edgeworth Box diagram. Let good y be the numeraire (i.e. set py = 1 and let px = p). What price ratio(s) P* will support a competitive equilibrium allocation for this economy?
None

SEE MORE QUESTIONS

Recommended textbooks for you

Economics (MindTap Course List)

Economics

ISBN:

9781337617383

Author:

Roger A. Arnold

Publisher:

Cengage Learning

Microeconomics

Economics

ISBN:

9781337617406

Author:

Roger A. Arnold

Publisher:

Cengage Learning

Macroeconomics

Economics

ISBN:

9781337617390

Author:

Roger A. Arnold

Publisher:

Cengage Learning

Economics (MindTap Course List)

Economics

ISBN:

9781337617383

Author:

Roger A. Arnold

Publisher:

Cengage Learning

Microeconomics

Economics

ISBN:

9781337617406

Author:

Roger A. Arnold

Publisher:

Cengage Learning

Macroeconomics

Economics

ISBN:

9781337617390

Author:

Roger A. Arnold

Publisher:

Cengage Learning

Microeconomic Theory

Economics

ISBN:

9781337517942

Author:

NICHOLSON

Publisher:

Cengage

SEE MORE TEXTBOOKS