Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

23Consider an exchange economy with two consumers, Charlie and Doris, and two commodities, apples and bananas. Charlie's initial endowment is 6 apples and 3 bananas.

image text in transcribed
23Consider an exchange economy with two consumers, Charlie and Doris, and two commodities, apples and bananas. Charlie's initial endowment is 6 apples and 3 bananas. Doris's initial endowment is 3 apples and 6 bananas. Charlie's utility function is U(Ac, Bc) = AcBc, where A denotes apples and Bc denotes bananas consumed by Charlie. Doris's utility function is U(Ap, B,) = AB, , where A, denotes apples and Bo denotes bananas consumed by Doris. If apples are the numeraire so that the price of apples P =1, what is the competitive equilibrium price of bananas? A) PB B) PR = 1 C) PR = 2 D) PB = 3 E) Pp = 3

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Economics The Basics

Authors: Michael Mandel

2nd Edition

0073523186, 9780073523187

More Books

Students also viewed these Economics questions