Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Parci and Max both utility functions for goods A and B as U = 20A0.25B0.5 with marginal utilities MUA = 5A-0.75 80.5 and MUB

image

Parci and Max both utility functions for goods A and B as U = 20A0.25B0.5 with marginal utilities MUA = 5A-0.75 80.5 and MUB = 10A0.25B-0.5. Prices are PA = $2 and Pg = $1. Parci has income of $360 and Max has income $450. A. Find the individual and total (market) quantities demanded for goods A and B. B. Total supply of A is 140 units and B is 540 units. Draw the consumption and production combinations in a graph with an Edgeworth Box and Production Possibilities Frontier. C. Explain (and show on your graph above) whether this economy is in a competitive equilibrium. If not, in which directions do you expect prices to change? D. Explain the efficiency conditions that must be satisfied efficient allocation of resources in this economy. E. Explain how the competitive equilibrium set of prices results in an efficient allocation of resources (efficiency conditions satisfied)

Step by Step Solution

3.50 Rating (147 Votes )

There are 3 Steps involved in it

Step: 1

A Finding the individual and total market quantities demanded for goods A and B Parcis Demand Parcis budget constraint 2A B 360 Utility maximization c... 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

Microeconomics An Intuitive Approach with Calculus

Authors: Thomas Nechyba

1st edition

538453257, 978-0538453257

More Books

Students also viewed these Economics questions

Question

Describe a traditional focus group.

Answered: 1 week ago