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 8 units of good x and 6 units of good y. Consumer a's utility function is given by: Ua(x,y) = X^3/4 Y^1/4 and consumer b's utility function is given by Ub(x,y) = X^1/2 Y^1/2. a) Suppose the price of good y is equal to 1. calculate the price of good x that will lead to competitive equilibrium. b) How much of each good does consumer a demand in equilibrium? c) How much of each good does consumer b demand in equilibrium? d) what is the mrs of consumer b at the competitive equilibrium?

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 8 units of good x and 6 units of good y. Consumer a's utility function is given by: Ua(x,y) = X^3/4 Y^1/4 and consumer b's utility function is given by Ub(x,y) = X^1/2 Y^1/2. a) Suppose the price of good y is equal to 1. calculate the price of good x that will lead to competitive equilibrium. b) How much of each good does consumer a demand in equilibrium? c) How much of each good does consumer b demand in equilibrium? d) what is the mrs of consumer b at the competitive equilibrium?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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