1. Analyze the baseline economy consisting of two goods, two periods, and two representative consumers with...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
1. Analyze the baseline economy consisting of two goods, two periods, and two representative consumers with endowments. • Xavier has Cobb-Douglas preferences over consumption today and tomorrow. U*(C, C2) = .51 log(C,) + 49 log(C,). • He begins with an endowment of 1000 pounds for consumption today and 1000 pounds for consumption tomorrow (E=E=1000). Note that people consume three to five pounds of food per day so 1,000 per year is a reasonable value. Well, at least it is a nice round number. Yuri also has Cobb-Douglas preferences but is slightly more impatient than Xavier is. U' (C,, C) = .52 log(C,) + 48 log(C,). He starts with the identical endowment of 1000 pounds for consumption today and 1000 pounds for consumption tomorrow (E:=E2-1000). A. Solve for the general equilibrium. What prices and interest rates underlie the equilibrium? Pi = S_ P2 = $ B. State the amount each person consumes in each period. Xavier: C = C2 = Yuri: C = C2 = C. Demonstrate numerically that the goods markets in period 1 and in period 2 clear. (market clearing) D. Demonstrate numerically that both Xavier and Yuri are better off at the new consumption levels than at their respective endowments. (utility maximizing) E. Demonstrate numerically that both Xavier and Yuri can afford their new consumption levels. (budget constraint) F. Explain who bought, who sold, and why? 1. Analyze the baseline economy consisting of two goods, two periods, and two representative consumers with endowments. • Xavier has Cobb-Douglas preferences over consumption today and tomorrow. U*(C, C2) = .51 log(C,) + 49 log(C,). • He begins with an endowment of 1000 pounds for consumption today and 1000 pounds for consumption tomorrow (E=E=1000). Note that people consume three to five pounds of food per day so 1,000 per year is a reasonable value. Well, at least it is a nice round number. Yuri also has Cobb-Douglas preferences but is slightly more impatient than Xavier is. U' (C,, C) = .52 log(C,) + 48 log(C,). He starts with the identical endowment of 1000 pounds for consumption today and 1000 pounds for consumption tomorrow (E:=E2-1000). A. Solve for the general equilibrium. What prices and interest rates underlie the equilibrium? Pi = S_ P2 = $ B. State the amount each person consumes in each period. Xavier: C = C2 = Yuri: C = C2 = C. Demonstrate numerically that the goods markets in period 1 and in period 2 clear. (market clearing) D. Demonstrate numerically that both Xavier and Yuri are better off at the new consumption levels than at their respective endowments. (utility maximizing) E. Demonstrate numerically that both Xavier and Yuri can afford their new consumption levels. (budget constraint) F. Explain who bought, who sold, and why?
Expert Answer:
Posted Date:
Students also viewed these economics questions
-
State whether each of these numbers is a reasonable value for a polymers molecular weight: 100 amu, 10,000 amu, 100,000 amu, 1,000,000 amu?
-
3. Consider a simple two-person exchange economy consisting of two guys named Skinny Pete and Badger, and two goods, beer and magazines. Currently, Skinny Pete consumes 2 magazines and 6 six-packs of...
-
The Cobb Douglas Costs Excel App provides a nice link between the Cobb Douglas (CD) production analysis of Chapter 6 (see also Cobb Douglas Production Excel App) and the cost analysis in this...
-
If the end of the cord is pulled downward with speed v C , determine the angular velocities of pulleys A and B and the speed of block D. Assume that the cord does not slip on the pulleys. Given: VC =...
-
A subsidiary sells land to the parent company at a significant gain. The parent holds the land for two years and then sells it to an outside party, also for a gain. How does the business combination...
-
Tom Snider is a staff accountant for BigBiz. Snider was recently given the task of developing a monthly flexible budget formula for several manufacturing costs. He was told that his equations would...
-
Dixens Ltd reported the following data (adapted in billions): Assume that in early 2009, an error was discovered which involved the closing stock for 2006 being overstated by 1 billion and the...
-
The income statement of Heifer Technology Inc. for the year ended December 31, 2011, is given below. Using the yearly income statement and the supplemental information, reconstruct the third-quarter...
-
Lasser Company plans to produce 20,000 units next period at a denominator activity of 60,000 direct labor-hours. The direct labor wage rate is $11.00 per hour. The company's standards allow 2 yards...
-
1. 2. 3. 4. Date 9/02/23 9/02/23 Deposit #1 9/03/23 Deposit No. /Check No. 9/03/23 Ck #1001 Ck #1002 Description Bella Boone met with her lawyer and CPA for advice on starting the business. They...
-
https://youtu.be/T8V_0LUCgmk?si=5vDtynzvfOijhOQk recognize familial issues associated with autism think of a family member of your choice and create a post on the Family Member Profile that expresses...
-
A company can invest funds for three years at LIBOR minus 25 basis points. The three-year swap rate is 3.25%. What fixed rate of interest can the company earn by using the swap?
-
Fogerty Company makes two products-Hubs and Sprockets. Data regarding the two products follow: Direct Labor-Hours Hubs Sprockets per Unit 0.60 0.20 Annual Production 12,000 units 44,000 units...
-
Pharoah Grove Hardware has the following balances in the company ledgers for the year ending December 31: Mortgage Payable $86,900 Interest Expense $13,000 Prepaid Insurance $5,600 Land $21,400...
-
In order to faster convert Account Receivable into cash, a company can sell its accounts receivable to another company, called a factor, at a discount. Assume your average credit sales are $50...
-
Suppose that a and b are integers, a = 3 (mod 13), and b=8 (mod 13). Find the inte- ger c with 0c 12 such that (i) c= 19a (mod 13) (ii) c = 11b (mod 13) (iii) c = 2a+3b (mod 13) (iv) c = a-b (mod 13)
-
On June 1, 2023, JetCom Inventors Inc. Issued a $590,000 11%, three-year bond. Interest is to be paid semiannually beginning December 1, 2023 Required: a. Calculate the issue price of the bond...
-
State whether each statement is true or false. If false, give a reason. {purple, green, yellow} = {green, pink, yellow}
-
Suppose a company has five-year, semiannual-coupon bonds carrying an 8 percent coupon rate that are selling for $1,200. What would be the aftertax cost of debt on these bonds if the appropriate tax...
-
Suppose a company has five-year, semiannual-coupon bonds carrying an 8 percent coupon rate that are selling for $1,200. What would be the beforetax cost of debt on these bonds if the appropriate tax...
-
Suppose a firm has 19 million shares of common stock outstanding with a par value of \($1.00\) per share. The current market price per share is \($18.35\). The firm has outstanding debt with a par...
Study smarter with the SolutionInn App