Question
In: Economics
Sarah and Andrew are two traders in a pure exchange economic with two goods, Bikes (B)...
Sarah and Andrew are two traders in a pure exchange economic with two goods, Bikes (B) and Computers (C). Sarah's preferences are described by the Cobb-Douglas Utility function: Us=B1/3SC2/3S U s = B S 1 / 3 C S 2 / 3 Andrew's preferences are given by: UA=B1/2AC1/2A U A = B A 1 / 2 C A 1 / 2 Assume the price of Bikes is 1 and the price of computers is p. The initial endowments are BA = 10, BS = 20, CA = 20 and CS = 10. What is the equilibrium price of computers relative to bikes (p)? Your Answer:
Solutions
Rahul Sunny answered 3 months agoRelated Solutions
6. Consider a pure exchange economy with two individuals, Sarah and James, and two goods, X...
6. Consider a pure exchange economy with two individuals, Sarah
and James, and two goods, X and Y . For Sarah, goods X and Y are
perfect complements (Leontief preferences), so her utility function
is US = min {XS, YS}. For James, goods X and Y are perfect
substitutes, so his utility function is UJ = XJ + YJ . Suppose the
economy has 100 units of good X and 50 of good Y . Draw
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3. Consider a pure exchange economy with two goods, wine (x) and cheese (y) and two...
3. Consider a pure exchange economy with two goods, wine (x)
and cheese (y) and two con- sumers, A and B. Let cheese be the
numeraire good with price of $1. Consumer A’s utility function is
UA(x,y) = xy and B’s utility function is UB(x,y) = min[x,y]. A has
an initial allocation of 10 x and no y, and B has an initial
allocation of 10 units of y and no x.
(a) Put wine x on the horizontal axis...
Consider a pure exchange economy with two consumers, Ann (A) and Bob (B), and two commodities,...
Consider a pure exchange economy with two consumers, Ann (A) and
Bob (B), and two commodities, 1 and 2, denoted by (x^A_1, x^A_2)
and (x^B_1, x^B_2). Ann’s initial endowment consists of 5 units of
good 1 and 10 units of good 2. Bob’s initial endowment consists of
10 unit of good 1 and 5 units of good 2. The consumers’ preferences
are represented by the following utility functions:U^A(x^A_1,
x^A_2) =min{x^A_1, x^A_2} and U^A(x^B_1, x^B_2)= =min{x^B_1,
x^B_2}. Denote by p1 and...
Consider a pure exchange economy with two consumers, Ann (A) and Bob (B), and two commodities,...
Consider a pure exchange economy with two consumers, Ann (A) and
Bob (B), and two commodities, 1 and 2, denoted by (x^A_1 , x^A_2 )
and (x^B_1 , x^B_2 ). Ann’s initial endowment consists of 15 units
of good 1 and 5 units of good 2. Bob’s initial endowment consists
of 5 unit of good 1 and 5 units of good 2. The consumers’
preferences are represented by the following Cobb-Douglas utility
functions: U^A(x^A_1 , x^A_2 ) = (x^A_1 )^2...
Consider the exchange economy. It consists of two individuals, A and B. The only two goods...
Consider the exchange economy. It consists of two individuals, A
and B.
The only two goods available for consumption are red wine and
choco-
late. The endowment of the economy is 64 units of red wine and
16 units
of chocolate. A’s endowment is wa ? and ca
? ; B’s endowment is wb ? and
cb ? . The utility functions for each individual are
U = 2(wa ca )1/2 and
UB = 10(wBcB)1/2, where wj and cj are...
4: There is an exchange economy with two agents, A, B, and two goods, x, y....
4: There is an exchange economy with two agents, A, B, and two
goods, x, y. A's endowment is x = 6, y = 4, and B's endowment is x
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u(x, y) = xy. Find a competitive equilibrium allocation (CEA) and
associated equilibrium prices. What difference would it make if A's
endowment is x = 3, y = 1, and B's...
Consider an exchange economy with two individuals, A and B, and two goods, x and y....
Consider an exchange economy with two individuals, A and B, and
two goods, x and y. Individual A has utility function
UA(xA; yA) =
xAyA, and individual B has utility function
UB(xB; yB) =
xByB. If there are 10 units of x and 10 units
of y in the market, what is the equation of the contract curve?
Group of answer choices
yA = 0.5xA
yA = 2xA
yA = 5xA
yA = xA
11. Consider an exchange economy consisting of two people, A and B, endowed with two goods,...
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B, endowed with two goods, 1 and 2. Person A is initially endowed
with ωA= (0,3) and person B is initially endowed with
ωB= (6,0). They have identical preferences, which are
given by UA(x1, x2) =UB(x1, x2)
=x12x2.
(a) Write the equation of the contract curve (express
x2Aas a function of
x1A1).
(b) Let p2= 1. Find the competitive equilibrium
price,p1, and allocations,xA=
(x1A, x2A) and
xB= (x1B,
x2B)....
Consider a pure exchange economy with 2 goods and 3 agents. Goody is the numeraire,...
Consider a pure exchange economy with 2 goods and 3 agents. Good
y is the numeraire, so we set py = 1. • Mr. 1 is Cobb-Douglas of
type λ = 0.25 and is endowed with (10, 4). • Mr. 2 is Cobb-Douglas
of type λ = 0.5 and is endowed with (5, 9). • Mr. 3 is Cobb-Douglas
of type λ = 0.75 and is endowed with (20, 20). In the following
steps, you will find the equilibrium of...
Consider an exchange economy with two agents, A, B, and two goods, x, y. A's endowment is...
Consider an exchange economy with two agents, A, B, and two
goods, x, y. A's endowment is
x = 6, y = 4, and B's endowment is x =
4, y = 6.
(a) Suppose that A has utility
function u(x, y) = x
+ y and B has utility function
u(x, y) = xy. Find a
competitive equilibrium allocation (CEA) and associated equilibrium
prices. What difference would it make if A's endowment is
x = 3, y = 1, and B's endowment...
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