ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- 3. Consider an economy with two individuals, Eve and Adam. There are two goods-apples(A) and figs (F). Eve has fixed-coefficient preferences {} where the superscript denotes e for Eve. Eve has an endowment of 20 apples and nothing else. Adam owns only labour, and consumes only apples, thus ua (A, F) = A. u(A, F) = min Note that Adam gets no utility from leisure, so he supplies labour inelastically. Labour (L) is needed to produce figs, using the technology F = L. Suppose initially the endowment of Adam is K units of labour. (a) Compute algebraically the competitive equilibria of this economy for both K K. Is it possible that he becomes worse off?arrow_forwardI need help with this home work problem.arrow_forwardA 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_forward
- In an exchange economy, there are two agents, A and B, and there are 560.00 total units of x and 560.00 total units of y. The two consumers have utility functions u(x, y) = x²y and u³ (x, y) = xy, respectively. Assume the initial endowments are wд = (504.00, 56.00) and wB = (56.00, 504.00). Let p be the price of good y, and let the price of good x be 1. The competitive equilibrium value of p is answer to the nearest two decimals if needed.) (Round yourarrow_forwardPlease draw its diagram Consider the following pure exchange economy with two consumers and two goods. Consumer 1 has utility given by U1 = min {4x1, 2x2} Consumer 2 has utility given by U2 = 2x1 + x2 The initial endowment has consumer 1 starting with 200 units of x1 and 200 units of x2. Consumer 2 starts with 300 units of x1 and 300 units of x2. Draw an Edgeworth box diagram for this initial endowment complete with the indifference curves for each individual.arrow_forwardConsider a two-person exchange economy in which initial endowments for both individuals are such that (e1 = e1) = (1,1). Suppose the two individuals have the following indirect utility functions: V1 (x, y) = ln M1 - a ln Px - (1-a) ln Py V2 (x, y) = ln M2 -b ln Px - (1-b) ln Py Where Mi is the income level of person i and Px and Py are the prices for goods x and goods y, respectively. a) Calculate the market clearing prices.arrow_forward
- QUESTION 1 Alice (A) and Bob (B) have an endowment of goods 1 and 2, with Alice's endowment being (wt, w) = (1,2) and Bob's endowment equals (wf , w) = (1,3). Alice's utility is given by u4 (xf, xf) = 2 ln xf + In æ£ , while Bob's utility is uB(xf, x}) = ln xf + 2 ln x? . Suppose that the social planner considers it to be imperative that agent B consumes exactly one uni of good 1 and four units of good 2. Although the social planner can not force the individuals to a particular consumption, they can enforce transfers of good 1 between the consumers (transfers of good 2 are not enforceable by the social planner). What transfer of good 1 would guarantee that in the resulting competitive Walrasian equilibrium consumer B consumes one unit of good 1 and four units of good 2? Answer this please Select one: O a. One half unit of good 1 has to be transferred from agent A to agent B. O b. There is no endowment for which agent B would consume x = 1 and x = 4 in the corresponding competitive…arrow_forwardSuppose 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 09arrow_forwardQUESTION 1 Alice (A) and Bob (B) have an endowment of goods 1 and 2, with Alice's endowment being (wf, wg) = (1,2) and Bob's endowment equals (wf, w) = (1,3). Alice's utility is given by ua(zf, x4) = 2 ln z4 + In z4, while Bob's utility is up(zf, x}) = In z? + 2 ln z}. Find the competitive (Walrasian) equilibrium prices in this pure exchange economy. Select one: O a. P1 = 5, P2 = 3 %3D O b. P1 = 3, P2 = 7 %3D O c. P1 = 7, P2 = 3 O d. Pi = 1, P = 4 Consider the same set up as in Question 1. Which of the following consumption bundles of consumer A belong to the contract curve? Select one: O a. rf = 1, xg = 1 O b. af = 2, xg = 1 O c. af = 1, x O d. af = 2, xg = 4 %3D %3D 3arrow_forward
- I need help with this study question for my examarrow_forwardSuppose there are two consumers A and B, and two goods x and y. A's utility function has the following form UA = XA - (XB)1. Which of the following is true? Consumer A's consumption of good x exhibits a negative externality. Consumer A's consumption of good x exhibits a positive externality. Consumer B's consumption of good x exhibits a negative externality. Consumer B's consumption of good x exhibits a positive externality.arrow_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
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