Consider a competitive exchange economy with two individuals (A and B) and two goods (X and...
An exchange economy consists of two individuals---consumer A and consumer B with preferences over two goods---goods X and Y. Suppose consumer A is initially endowed with 9 units of good X and 6 units of good Y and consumer B is initially endowed with 91 units of good X and 14 units of good Y. Both consumer A and consumer B have identical preferences with the following marginal rates of substitution: MUX - 1 YA MRS, = MUX - and...
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 an exchange economy consisting of two people, A and B, endowed with two goods, 1 and 2. Person A is initially endowed with wA(4,8) and person B is initially endowed with w(4,0). Their preferences are given by UA(ri,r2)1 and UB(xi, r2) (a) Write the equation of the contract curve (express as a function of ) (b) Let P2 Find the cornpetitive equilibrium price, pi, and allocations, xA -(zl,r1) and B-B (c) Now suppose that person B's preferences are instead...
Consider a pure exchange economy with two individuals (A and B) and two goods (x and y). The utility functions are given by UA(xA, yA) = min[xA, yA] UB(xB, yB) = min[xB, yB], where xi and yi are the quantities of the two goods consumed by individual i = A, B. The total endowments are wx = 10 and wy = 5. (a) Represent the indifference curves of both individuals in the Edgeworth box and find the Pareto set. (b)...
Consider a pure exchange economy with two consumers and two goods. Total endowments of the two goods are given by X̅=10 and Y̅=20. Consumer A’s utility function is given by UA(XA,YA)=sqrtXAYA.. Consumer B regards the two goods as perfect substitutes with MRS=2. (1) Find the contract curve for this economy. (2) Suppose the initial endowments are given as the following: 2,8), (XA, YA)=(2,8) (XB,YB)=(8,12). Find the set of Pareto efficient allocations that Pareto dominate the endowment poin
Consider a pure exchange economy with two goods, wine (x) and cheese (y) and two con- sumers, A and B. Let cheese be the numeraire good with price of $1. Consumer A's utility function is UA(x; y) = 2x+y and B's utility function is UB(x; y) = xy. A's initial allocation is 10 units of x and 0 units of y. B's initial allocation is 0 units of x and 30 units of y. (a) Put wine x on the...
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...
In an exchange economy, there are two people (A and B), and two goods (X and Y). The utility functions of A and B are given by UA = XẪYẦ and UB = XểYa. There are 10 units of X and 10 units of Y in total. Which of the following gives a condition for Pareto optimality? 20X 30XA (Continued from previous question) Suppose person A is originally endowed with all 10 units of good X and person B is...
Consider an exchange economy consisting of two people, A and B, endowed with two goods, 1 and 2. Person A is initially endowed with ωA= (10,0) and person B is initially endowed with ωB= (0,20),where the first component of each vector indicates the endowment of good 1.Their preferences are given by UA(x1, x2) =x10.6x20.4 and UB(x1, x2) = 3x1+x2. Which of the following choices represents the contract curve in this economy (in terms of A’s coordinates)? (a) x2A=(xA1)/3 (b) x2A=(2xA1)/9 ...