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.
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.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
I need help with this homework question.

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

This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 5 images

Knowledge Booster
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


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 (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