Question 4. Suppose there are two consumers, A and B, and two goods, X and Y. Consumer A is given an initial endowment of 5 units of good X and 9 units of good Y. Consumer B is given an initial endowment of 3 units of good X and 7 units of good Y. Consumer A's utility function is given by: UA(X,Y)=X¹2*Y¹2 And consumer B's utility function is given by UB(X,Y)=X³4X¹4 a) Suppose the price of good Y is equal to one. Calculate the price of good X that will lead to a competitive equilibrium.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
I need help with this homework question.
Question 4.
Suppose there are two consumers, A and B, and two goods, X and Y. Consumer
A is given an initial endowment of 5 units of good X and 9 units of good Y. Consumer B is given an
initial endowment of 3 units of good X and 7 units of good Y. Consumer A's utility function is given by:
UA(X,Y)=X¹2 Y¹2,
And consumer B's utility function is given by
UB(X,Y)=X3/4#y1/4
a) Suppose the price of good Y is equal to one. Calculate the price of good X that will lead to a
competitive equilibrium.
b) How much of each good does each consumer demand in equilibrium?
c) Using an Edgeworth Box, illustrate
The Budget Constraint
The Initial Endowment (W)
The Competitive Equilibrium (D)
Label the initial endowment "W" and label the Competitive Equilibrium "D". Make sure your graph is
clearly and accurately labeled.
Transcribed Image Text:Question 4. Suppose there are two consumers, A and B, and two goods, X and Y. Consumer A is given an initial endowment of 5 units of good X and 9 units of good Y. Consumer B is given an initial endowment of 3 units of good X and 7 units of good Y. Consumer A's utility function is given by: UA(X,Y)=X¹2 Y¹2, And consumer B's utility function is given by UB(X,Y)=X3/4#y1/4 a) Suppose the price of good Y is equal to one. Calculate the price of good X that will lead to a competitive equilibrium. b) How much of each good does each consumer demand in equilibrium? c) Using an Edgeworth Box, illustrate The Budget Constraint The Initial Endowment (W) The Competitive Equilibrium (D) Label the initial endowment "W" and label the Competitive Equilibrium "D". Make sure your graph is clearly and accurately labeled.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 5 images

Blurred answer
Knowledge Booster
Contrast Curve
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
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)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
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-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education