Suppose costumer 1's endowment is (a₁, b₁) = (3, 7) and consumer 2'sendowment is (a2, b2 ) = (7, 3). Consumer 1 has preferencesu₁ (a₁, b₁) = a₁b₁, and consumer 2 has preferences u₂(a2, b₂) = a₂b₂. IfPa = Pb = 1 at the competitive equilibrium, how much of good b doesconsumer 1 consume at the competitive equilibrium?O 1OOOOO2456789

In a competitive market, the sum of the consumer preferences is maximized subject to the…

Suppose costumer 1's endowment is (a₁, b₁) endowment is (a2, b₂) = (7,3). Consumer 1 has preferences u₁ (a₁, b₁) = a₁b₁, and consumer 2 has preferences u2 (a2, b2) = a2b2. If Pa = Pb = 1 at the competitive equilibrium, how much of good b does consumer 1 consume at the competitive equilibrium? O 1 2 4 5 6 7 8 9 = (3, 7) and consumer 2's

Suppose costumer 1's endowment is (a₁, b₁) endowment is (a2, b₂) = (7,3). Consumer 1 has preferences u₁ (a₁, b₁) = a₁b₁, and consumer 2 has preferences u2 (a2, b2) = a2b2. If Pa = Pb = 1 at the competitive equilibrium, how much of good b does consumer 1 consume at the competitive equilibrium? O 1 2 4 5 6 7 8 9 = (3, 7) and consumer 2's

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

Suppose costumer 1's endowment is (a₁, b₁) = (3, 7) and consumer 2's endowment is (a2, b₂) = (7,3). Consumer 1 has preferences 1 at the competitive equilibrium, how much of good b does = u₁ (a₁, b₁) = a₁b₁, and consumer 2 has preferences u2(a2, b₂) = a₂b₂. If Pa = Pb consumer 1 consume at the competitive equilibrium? O O 4 O 1 O O 2 5 6 8 09
John and Belle consume only two goods, x and y. They have strictly convex preferences and no kinks in their indifference curves. At the initial endowment point, the ratio of John's marginal utility of x to his marginal utility of y is J and the ratio of Belle's marginal utility of x to her marginal utility of y is B, where ] B. b. C < J. c. C = J. d. C = B. e. J
John and Belle consume only two goods, x and y. They have strictly convex preferences and no kinks in their indifference curves. At the initial endowment point, the ratio of John's marginal utility of x to his marginal utility of y is J and the ratio of Belle's marginal utility of x to her marginal utility of y is B, where J B. b. C < J. c. C = J. d. C = B. e. J
Refer to figure. Suppose the consumer is endowed with 10 units of orange and consumes 5 units of apple. The price of the apple decreases and at the new price the consumer consumes 9 units of apple. The change in the demand for apples due to the endowment effect is equal to Optionsa) 3b) 4c) 1d) none of these
2. Consider an economy with two agents and two commodities. Consumers' preferences are represented by the following utility functions u₁(x,x) = (x²) ¹ (x²) ½ u₂(x², x²) = x² + x². Consumers' initial endowments are e² = (6,4). Note: You can normalize the price of one good to 1 at any point when solving this question. e¹ = (10,2) (a) Draw the Edgeworth box that represents this economy. Clearly indicate the size of the box (i.e. the maximal feasible amounts of good 1 and good 2). Show the location of the initial endowment and draw the indifference curve of each consumer that passes through the initial endowment.
Suppose there are two agents Ahmet and Berk in an economy, and both consume two goods X and Y. Also assume that price of X is 2 YTL and Y is the numeraire good, thus price of Y is 1 YTL. Ahmet and Berk has the following utility functions:UAhmet (XA,YA)= 5ln(XA)+ln(YA)UBerk (XB,YB)= XB0,5 YB0,5a. Now assume that both X and Y are private goods. Write down the optimality condition for both agents. Then, write down the optimal level of X as a function of Y for both agents.b. Now assume that X is a public good, but Y is a private good. Write down the optimality condition for good X. Then, write down the optimal level of X as a function of Y for both agents.c. Now compare the consumption levels for X in parts a and b.
Person A has a utility function of and person B has a utility function Agent A and agent B have identical endowments of (1/2,1/2). (a) Illustrate this situation in an Edgeworth box diagram. (b) What is the equilibrium relationship between p1and p2? (c) What is the equilibrium allocation?
9. Consider an Edgeworth box economy with two consumers, whose utility func- tions and endowments are e' = (5,5) 2 = (5,5) In the following, use the normalization p2 = 1. (a) Find the competitive equilibrium price. (b) State the first fundamental theorem of welfare and verify that it holds in this economy. (e) Consider the allocation ã = (x',) = (2,3), (8, 7). Show whether this allo- cation can supported as an equilibrium with transfers. (d) State the second fundamental theorem of welfare, and briefly discuss whether the result in part (c) conform with or violate this theorem.
Rafe is optimally choosing to consume 6 apples and 3 bananas. The prices of apples and bananas are p. = 7 and pb - 7. Which of the following utility functions over quantities of apples (a) and bananas (b) could represent Rafe's preferences? = u(a, b)-a4/5 61/5 Ou(a, b) = a¹/5 64/5 Ou(a, b)-a2/3 b1/3 Ou(a, b)-a¹/3 2/3
3(b)Consider the following social choice problem in the setting of consumption of two goods by two consumers. The two goods are called tillip and quillip and the two consumers are called 1 and 2. Consumer 1 has utility function U; (t,g) =6+.4 In(t) + .6 In(q) (where t is the amount of tillip 1 consumes and q is the amount of quillip). Consumer 2 has utility function U; (t,q) = 8 + In (t) + In(q). The social endowment consists of 15 units of tillip and 20 units of quillip. a. Suppose that a social dictator has social welfare functional of the following form: social welfare, as afunction of (u",u") is a weighted sum with weight 2 on the lesser of u' and u' and weight 1 on the greater of the two. What will be the welfare optimum plan chosen by this social planner? b. What is the set of all feasible, Pareto efficient allocations of the consumption good for this society? %3D
PART A You must answer the question in this section. A.1 Individuals in a market each have a total budget y to spend on two goods q₁ and q2 at the prices p1 and p2 respectively. Their preferences are described by the utility function u (91, 92) = (Bq₁ - (A-92)², Bq1, where A, B > 0 are preference parameters. (a) Show that the quantity demanded of good 2 is y P2 A- B, 0, f2 (y, P1, P2) = if q2 ≤ A; if q2 > A; if P2 if A if A. (d) Suppose that the good q2 is supplied by a monopolist with a cost function cQ² where Qis its total output of good 2. Draw this monopolist's demand, MR and MC curve. Calculate the monopolist's profit-maximizing prices and quantity and compare them with their perfectly competitive equivalent values. (e) Explain why this monopolist does not increase its output without limit as N, the size of its market, increases. Can regulation of the monopolist solve this problem? (f) How much would supply increase (and price fall) if another firm entered this market and the…
Suppose that consumer I has the utility function u(x,y) = x + 2y and consumer II has the utility function u(x,y) = min{x, 2y}. Consumer I initially has 12 units of y and zero units of x, while consumer II has 12 units of x and zero units of y. It is correct to state that, in competitive equilibrium, the agents' consumption basket will be: