Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The picture is in the picture attached. Thank you. Q2 [COMPETITIVE GENERAL EQUILIBRIUM] Amy (A) and Brian (B) have the following utility functions: UA =

The picture is in the picture attached.

Thank you.

image text in transcribed
Q2 [COMPETITIVE GENERAL EQUILIBRIUM] Amy (A) and Brian (B) have the following utility functions: UA = 2XAYA, UB = (XBYB) 15 where their endowments of consumption goods X and Y are as follows: XA = 60, YA = 10, XB = 60, YB = 50. (@) At the endowment point, what are the marginal rates of substitution of X for Y for Amy? For Brian? (b) If they could engage in voluntary exchange, would they? (c) Normalize the price of good Y to 1, i.e., Py = 1, find the competitive equilibrium price of good X, Px. (d) Find both Brian and Amy's consumption bundles in the equilibrium. (e) Explain the economic intuition/rationale of how you find the competitive price and allocation in (c) in words. (f) Is the allocation of resources achieved in (c) Pareto-Optimal? Explain. (g) Draw an Edgeworth box that shows all possible allocations and plot the endow- ment points. Can you Show the steps to pin down the indifferent curves and plot the indifference curve of the two consumers and the contract curve in the Edgeworth box as well

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

Essentials Of Economics

Authors: N. Gregory Mankiw

5th Edition

0324590024, 9780324590029

More Books

Students also viewed these Economics questions

Question

600 lb 20 0.5 ft 30 30 5 ft

Answered: 1 week ago

Question

1. What does this mean for me?

Answered: 1 week ago