In an exchange economy, there are two agents, A and B, and there are 560.00 total units of x and 560.00 total units of y. The twoconsumers have utility functions u(x, y) = x²y and u³ (x, y) = xy, respectively.Assume the initial endowments are wд = (504.00, 56.00) and wB = (56.00, 504.00).Let p be the price of good y, and let the price of good x be 1. The competitive equilibrium value of p isanswer to the nearest two decimals if needed.)(Round your

The question is solved below:Here CE denotes competitive equilibriumIn the given scenario, the…

Answered: In an exchange economy, there are two…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Consider an agent who want to maximize her utility function, u (C₁, C₂) = C₁ C₂ subject to the budget constraint, c₁ + pc₂ = w with C₁, C₂ > 0 indicating consumption of commodity 1 and 2, respectively, while p>0 and w>0 are exogenously given parameters, indicating the relative price of good 2 and the relative wealth in term of good 1's price. Decide whether the following claims are true or false. W • The value of the Lagrange multiplier is λ = 2p False True w² • The value function u(w) is equal to u(w) = 4p True False • λ(w) measures the approximate change in utility that can be obtained from an increase/decrease in wealth w. True False
Suppose the Super Bowl is this week, and Raphael is in need of a television to watch the big game. As a college student, Raphael knows that he can either buy his flat-screen television at the local electronics store, or he can shop online for a better deal but have to wait four days for the television to arrive. The following problem uses the economic concept of rate of time preference to help determine which decision is better for Raphael. Throughout the question, assume that Raphael pays for the good the day he buys it, so his wealth is affected in the initial time period no matter where he buys the good. Also, assume the shipping cost and cost to travel to the store are incorporated into their respective given prices. Finally, assume the goods are identical, and there's no cost to gaining information about prices-in other words, he knows the best price online and in the store without having to search. Suppose Raphael receives a utility of 35.11 utils once he actually receives his…
(5) A has utility function u4(x4) = x4 + x and initial endowment w4 = (3,6). Consumer B has utility function uB (xB) = xf · x% and initial endowment wB = (3,6). Consider an exchange economy with two consumers and two goods. Consumer (a) Is the initial endowment a Pareto efficient allocation? Justify your answer. (b) Find a competitive equilibrium (p, xª, x³) for the economy. (c) Construct the contract curve. A picture here is not a complete answer; you need to specify analytically the set of points that are in the contract curve.
!
An individual's utility function is given by: U (q1 , q2) = q11/2 . q2 Suppose we know that the individual is maximizing their utility by consuming 9 units of good #1 (q1=9) and six units of good #2 (q2=6). If the current price for good #1 is $1 (p1=1), what must be the price of good #2 (p2) and what must be the individual's current income (y) available to spend on the two goods? a.) p2 = b.) y=
In a two-good market, a consumer starts with an initial endowment of (x₁, x2) = (15.00, 5.00), while the market prices for these goods are given by (P1, P2) = (7.00, 3.00). The consumer has the following utility function: U 0.52 0.48 - Given this information, what will this consumer's final choice of quantity for each good be? x1 = x2 =
= 5. Consider an economy with a single (representative) agent with utility function u(x, lc) = x¹/514/5 and an endowment of 0 units of x and 10 units of time, which the agent can use as leisure (c) or labor (L) (i.e., L + lc = 10). The agent owns a firm that produces good x using L as an input, with technology of production given by x(L) = 3√L. Let the price of x be p = 1 and let w denote the price of time (i.e., the price of leisure and the wage). Find the competitive price of time w and the competitive allocation.
Suppose you find that MU1(X1Xx2)=2x2 and MU₂(x1+x₂)=2x1. What is the rate at which the consumer is willing to trade good 2 for good 1 at bundle (2,4)? (Note: enter a positive number, i.e. enter the quantity of good 2 that the consumer is willing to give up for an additional-marginal-unit of good 1.) Question 20 Suppose you find that the expressions of the marginal utilities for a consumer are given by MU1 (1,2)= 2 and MU₂ (1,2)= 7. Then you can conclude that: This consumer has Cobb-Douglas tastes For this consumer good 1 and good 2 are perfect complements For this consumer good 1 and good 2 are perfect substitutes None of the above Question 21 Suppose a consumer is always willing to give up 5 units of good 2 for an additional unit of good 1. For this consumer: Good 1 and good 2 are perfect complements Good 1 and good 2 are perfect substitutes Good 1 and good 2 are both essential goods None of the above
Marbella has 101 residents. All wear the same fancy clothes and each has the same utility function, u(m, b, B) = m + 14b − b2 − B/50, where m is the amount of macaroni (in kilograms) that he or she eats per day, b is the number of hours that he or she spends on the beach per day, and B is the total number of person-hours spent per day on the beach by other residents of Marbella. Each has an income of $10 per day and macaroni costs $1 per kilogram. The city council is considering a law that would limit the amount of time that any person can spend on the beach. How many hours per day should they allow in order to maximize the utility of a typical Marbellite? A. 6 B. 9 C. 7 D. 10 E. They could not possibly be made better off by legislation that limits their freedom to choose.
Consider a pure exchange economy with two goods k = 1,2 and two households i = A, B. The total available amount of good 1 and 2 is 9 and 12 units, respectively. Utility functions for households A and B are UA (TA1, A2) = TA1TA2 and UB(B1, B2) = XB1T32. (a) Find an expression for the Pareto optimal set. (b) Assume e A = (4,4) and eg (5,8) are A and B endowments, respectively. Find the competitive equilibrium. (c) Is the competitive equilibrium allocation in the Pareto Optimal set? Why this result should not surprise us?
B4
(1) Consider a small exchange economy with two consumers, A and B, and two commodities, ₁ and 2. Consumer A's initial endowment is 3 units of ₁ and 2 unit of 2. Consumer B's initial endowment has 5 units of 2₁ and 4 units of r2. Consumer A's utility function is given by U(₁, ₁) = x^x^. Consumer B's utility function is given by U(x,x) = 2x² + x2. Note that and are the amounts of the two goods for Consumer A, and rf and are amounts of the two goods for Consumer B. (a) Draw an Edgeworth box, showing the initial allocation. Label it as E. Measure Consumer A's consumption from the lower left and Consumer B's from the upper right. Also measure the number of ₁ on the horizontal axis and the number of r2 on the vertical axis. (b) Draw Consumer A's indifference curve (ICA) going through E. (c) Draw Consumer B's indifference curve (ICB) going through E.

SEE MORE QUESTIONS

Recommended textbooks for you

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

Principles of Economics (MindTap Course List)

Economics

ISBN:

9781305585126

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Managerial Economics: A Problem Solving Approach

Economics

ISBN:

9781337106665

Author:

Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:

Cengage Learning

Managerial Economics & Business Strategy (Mcgraw-…

Economics

ISBN:

9781259290619

Author:

Michael Baye, Jeff Prince

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS