ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- A and yд are his = XBYB, Alberto's utility function is u(xA, YA) = min{A, YA}, where consumptions of goods and y. Bella's utility function is u(XB, YB) where x³ and yß are her consumptions of goods and y. Alberto's endowment is 5 units of x and no y. Bella's endowment is 11 units of y and no x. If x is the numeraire and p is the price of y in units of x, then in a competitive equilibrium ○ 11/5 = p 11/(p+1) +2.5 = 11 O min{5, 11}+11/2p=11 O min{5, 11}+5/2p=11 ○ 5/(p+1) +5.5 = 11arrow_forwardGive answer with explanation and Give Correct and incorrect answer explanationarrow_forward3. Christina loves pizza and hates burger. Her utility function is U(p – b) = p – 6", where is the number of pizzas she consumes and b is the number of burgers she consumes. John likes both pizza and burger. His utility function is U(p, b) = p + 2\b Christina has an initial endowment of no pizzas and 8 burgers. John has an initial endowment of 16 pizzas and 8 burgers. a. Graph the initial endowment and label it E b. If Christina hates burgers and John likes them, how many burgers can Christina and John be consuming at a Pareto optimal allocation? What is John's marginal utility for pizzas and burgers? Mark the locus of Pareto optimal allocations of pizzas and burgers between Christina and John on the grapsh above.arrow_forward
- Can you please help awnser 8 d I have attached awnser to 8 a to make it easier to understand and complete. Thank youarrow_forwardANS: T DIF: 2 15. Jack Spratt's utility function is U(F, L) I L. His wife's utility function is U(F, L) I F. If Jack's initial endowment is 10 units of F and 5 units of L and if Jack's wife's initial endowment is 6 units of F and 10 units of L, then in an Edgeworth box for Jack and his wife, an allocation of F and L will be Pareto optimal only if it is at a corner of the box. ANS: F DIF: 2 16. Jack Spratt's utility function is U(F, L) I L. His wife's utility function is U(F, L) F. If Jack's initial endowment is 40 units of F and 20 units of L and if Jack's wife's initial endowment is 24 units of F and 40 units of L, then in an Edgeworth box for Jack and his wife, an allocation of F and L will be Pareto optimal only if it is at a corner of the box. ANS: F DIF: 2 17. Jack Spratt's utility function is U(F, L) I L. His wife's utility function is U(F, L) I F. If Jack's initial endowment is 100 units of F and 50 units of L and if Jack's wife's initial endowment is 60 units of F and 100 units…arrow_forwardEach day Amina, who is in third grade, eats lunch at school. She likes only Twinkies (t) and apple juice (a), and these provides her a utility of; utility = U(t,a) = vVta. If apple juice is graph on the vertical axis and Twinkies on horizontal axis. Amina has a dimisnishing MRS. %3D %3D True Falsearrow_forward
- 7arrow_forward7. In an Edgeworth box for two consumers, A and B, with endowments of commodities Xa and Ya are A's endowments, Xb and Yb are B's, and Xo = Xa + Xb, Yo = Ya + Yb), the competitive equilibrium allocation of the two commodities represents a mutual tangency of both consumers' indifference curves with each other and with a common budget line. (a) The conditions require that A and B consume at a point on their budget lines where their indifference curves have the same marginal rate of substitution, and equilibrium for the market as a whole requires that the sum of the individuals' demands for each commodity must equal the totals (Xo and Yo) available. Mathematically express the point of equilibrium, that is, express the above statement with equations in relating each endowments, equilibrium points (Xa, Xb, Ya, Yb), and totals ((Xo, Yo). (b) Suppose MRSa = Ya/Xa, MRSB = Yb/Xb, Xa = 10, Ya, = 100, Xb = 50, Yb = 20, and let good Y be the numeraire (Py =1). Verify that the competitive…arrow_forward2. General Equilibrium Consider a market with two goods, x and z, and two consumers, A and B. The utility functions for consumers A and B are as follows UA ÜB 2 1 == XBZB and the initial endowments for each consumer are @ eA = (4,2) еB = (2,6) where consumer B is endowed with 2 unit of good x and 6 units of good z, respectively. a) Draw the Edgeworth Box (Don't worry about the shape of the utility curves. Just pick a general shape that we have used before). b) Derive the contract curve.arrow_forward
- 6. In an Edgeworth box for two consumers, A and B, with endowments of commodities Xa and d Ya are A's endowments, Xb and Yb are B's, and Xo = Xa + Xb, Yo = Ya + Yb), the competitive equilibrium allocation of the two commodities represents a mutual tangency of both consumers' indifference curves with each other and with a common budget line. (a) The conditions require that A and B consume at a point on their budget lines where their indifference curves have the same marginal rate of substitution. and equilibrium for the market as a whole requires that the sum of the individuals' demands for each commodity must equal the totals (Xo and Yo) available. Mathematically express the point of equilibrium, that is, express the above statement with equations in relating each endowments, equilibrium points (Xa, Xb, Ya, Yb), and totals ((Xo, Yo).arrow_forward5.18 In a two-good, two-consumer economy, utility functions are u¹ (x₁, x₂) = x₁(x₂)², u² (x₁, x₂) = (x₁)²x₂. Total endowments are (10, 20). (a) A social planner wants to allocate goods to maximise consumer 1's utility while holding con- sumer 2's utility at u² = 8000/27. Find the assignment of goods to consumers that solves the planner's problem and show that the solution is Pareto efficient. (b) Suppose, instead, that the planner just divides the endowments so that e¹ = (10, 0) and e² = (0, 20) and then lets the consumers transact through perfectly competitive markets. Find the Walrasian equilibrium and show that the WEAs are the same as the solution in part (a).arrow_forward***Please provide an answer and explanation for BOTH parts (A & B). B builds on and cannot be completed without A.arrow_forward
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