3. Consider a general equilibrium model with two individuals (A and B) and two goods (zi...
Description of the economy: For each of the following problems, consider a 2x2 Exchange Economy with two consumers A and B, and two goods X and Y . The preferences of consumer A can be represented by the utility function uA(xA, yA) = xAyA , where xA is the amount of good A consumed by consumer A, and yA is the amount of good Y consumed by consumer A. The preferences of consumer B can be represented by the utility...
Description of the economy: For each of the following problems, consider a 2x2 Exchange Economy with two consumers A and B, and two goods X and Y . The preferences of consumer A can be represented by the utility function uA(xA, yA) = xAyA , where xA is the amount of good A consumed by consumer A, and yA is the amount of good Y consumed by consumer A. The preferences of consumer B can be represented by the utility...
Consider a pure exchange economy two consumers, Rachel and Lauren, and two commodities, watermelon and tomatoes. Rachel’s initial endowment is 4 units of watermelon and 3 units of tomatoes. Lauren’s initial endowment is 2 units of watermelon and 5 units of tomatoes. Rachel and Lauren have identical utility functions: Rachel’s utility is UR(WR,TR) = WRTR where WR and TR is Rachel’s quantity of watermelon and quantity of tomatoes, respectively; similarly, Lauren’s utility is UL(WL,TL) = WLTL where WL and TL...
Two individuals, a and b, consume goods x and y. Their endowments are w(2,5) and wb (10,1). Both have identical Cobb-Douglas utility functions ui(x,y') xy where i malized to 1; for simplicity we write px as just p. Then consumer i's demand for each good is i 1 2 i m and I 2 where m refers to the value of consumer i's endowment. (a) Draw the set of interior Pareto efficient allocations in an Edge- worth box for this...
2) This guestion is from Final 2016. Consider an Exchange economx composed of twO individuals A and B and two goods x1 and x2. Individual A has an endowment of WA-(3,5) and individual B has an endowment of Ws- (3,3). A's utility function is given by UA- Xx2 a. (3 points) Show that no matter what utility function B has, there exists a Pareto Efficient (PE) allocation. (i.e. Speciỵa Pareto efficient allocation and explain why it is efficient nomatter what...
Pure Exchange Model 1. Consider a Pure Exchange Economy with two agents A and B and two goods X and Y in which each agent acts competitively. Their preferences are given by the following utility function U(X,Y)=X13*Y23 Their initial endowments are as follows W=(5,20) w- (25,10) a) Calculate the demand functions for Good X and Good Y for each agent. b) State the equilibrium conditions for this economy. c) Using these conditions and the demand functions found in part a)...
3. Consider two consumers (Ann and Bob) who trade apples and broccoli. Before trading, Ann owns 8 pounds of apples and 2 pounds of broccoli. Bob, on the other hand, owns 2 pounds of apples and 8 pounds of broccoli. Ann's preferences are represented by the utility function usa,bA) = 20A + 5b4. Bob's preferences are represented by the utility function ubla,bB) = abs. (a) Draw an Edgeworth box representing this economy. Clearly label the initial endow- ment and highlight...
Consider an exchange economy with two consumers, A and B, who can consume only two goods. Suppose consumers’ preferences are represented by a Cobb- Douglas utility function of the form u(x1i,x2i) = x1ix2i (here i is for consumer A or B) for a consumption bundle of two goods (x1i,x2i). The consumers have endowments eA = (e1A;e2A) = (4;1) and eB = (e1B;e2B) = (1;4). The price of good 1 is p1 and the price of good 2 is p2. You...
1. Consider the following exchange economy. There are two goods (1 and 2) and two consumers (A and B). Preferences and endowments are as follows: uA (イ·攻)-玲攻 TA _ (0,2) 2(4,0) (a) Draw an Edgeworth Box diagram to depict this economy. Your diagram should be clearly labelled, and should include the autar kic allocation as well as a couple of indifference curves for each consumer. (Indifference curves for A do not need to be precisely accurate but those for B...
2) Consider an Exchange economy composed of two individuals A and B and two goodsx1 and x2. Individual A has an endowment of W(3,5) and individual B has an endowment of Wa^- (3,3). A's utility function is given byUA Xx2. Suppose that B is neutral about x1 (neither increasing nor decreasing the amount of x1 affects her utility) and she prefers more of x2 to less. Specifv a utility function for B. Eind the equilibrium price and allocations. 3) Consider...