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Suppose that there is a pure exchange economy described by: Two commodities: automobiles (a) and boats...
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...
C1 [19 marks] Suppose Malcolm and Barnaby are the only two people in a pure exchange economy. Food and clothing are the only two commodities. Malcolm is endowed with 30 units of food and 10 units of clothing, while Barnaby is endowed with 10 units of food and 30 units of clothing. Let F = units of food and C = units of clothing. Malcolm’s utility function is UM = 2 min(F, C) and Barnaby’s utility function is UB =...
Suppose individuals A and B start with endowments (3,7) and (7,3),respectively. *Please answer all parts of the question including #5,6,7,8,9,10,11* Draw the Edgeworth box and label the initial endowments. Are the final allocations (6, 3) and (5, 6) feasible? Suppose that individual A has utility function UA = xA1 + 2xA2 . Draw a few of A’s indifference curves on the Edgeworth box. (Make sure you’ve drawn them correctly.) Suppose that individual B has utility function UB = 2xB1 +...
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...
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...
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)...
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...
Charlotte and Wilber are two agents in a two-agent, two-commodity pure exchange economy where apples and bananas are the two commodities. Charlotte loves apples and hates bananas. Her utility function is Ucu, b) = u 5 , where a is the number of apples she consumes and b in the number of bananas she consumes. Wilber likes both apples and bananas. His utility function is Uca, b) = a +2Vb. Charlotte has an initial endowment of no apples and 8...
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...
3 Consider a standard two agent economy with typical convex pref- erences (our usual kind, the indifference curves become gradually flatter). Pick an arbitrary endowment and draw the Edgeworth box of this econom i. Show the relationship between the initial endowment and the competitive equilibrium allocation. ii. State the First Welfare Theorem. Show that the First Welfare Theorem holds. Hint: This requires a brief mathematical argument iii. State the Second Welfare theorem. Defend it graphically. That is show how a...