Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider a single-market analysis of welfare (with production) . We use the notation qi to denote consumer i's demand for good 1, and qj be

Consider a single-market analysis of welfare (with production). We use the notation qi to denote consumer i's demand for good 1, and qj be firm J's supply of good 1.

There are 500 consumers. Let mi be the income of a particular consumer i. The income of the 500 consumers are distributed evenly in (0,1).

The utility of all consumers are the same. For consumer i, his utility is:

qi +x2i

The price of good 1 is denoted by p and that the price of good 2 is normalized to 1. The demand of Good 2 by consumer i is denoted by x2i. Hint:

MRSi=1/2(qi)^1/2

There are 1000 firms producing Good 1 and they are identical. Firm j has a cost function:

Cj(qj)=q2j

Part a:

Find qi (the demand of good 1 by consumer i) in terms of p.

Part b: Find the market demand function of good 1, denoted by D(p)

Part c:

Find the supply function for Good 1 for Firm j.

Part d:

Find the market supply function S(p).

Part e:

Find the equilibrium price p.

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

American Political Economy In Global Perspective

Authors: Harold L Wilensky

1st Edition

1139227920, 9781139227926

More Books

Students also viewed these Economics questions

Question

=+Does it present new cocktails or review restaurants?

Answered: 1 week ago

Question

=+Is the message on-strategy?

Answered: 1 week ago