Suppose there are two consumers, A and B, and two goods, X and Y. The consumers...

  

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Suppose there are two consumers, A and B, and two goods, X and Y. The consumers have the following initial endowments and utility functions: W = 10 W = 6 W = 4 W3 = 12 UA(X,Y)= XY! UB (X,Y)= X¹Y! a) (16 points) Using a clearly and accurately labeled Edgeworth Box, illustrate: • the initial endowment, labeled "W" . Each consumer's indifference curve at "W" The contract curve • The general equilibrium point, labeled "D" (you will have to come back to this later in the problem) • the budget constraint (you will have to come back to this later in the problem) b) (10 points) Suppose the price of Y is Py = 1. Calculate the value of each consumer's initial endowment after solving for the price of good X that will lead to a competitive equilibrium. Show your work. You may want to use part of the next page or the blank space on the front page to do your work. Write your final answers in the blanks below ΜΑ MB - Suppose there are two consumers, A and B, and two goods, X and Y. The consumers have the following initial endowments and utility functions: W = 10 W = 6 W = 4 W3 = 12 UA(X,Y)= XY! UB (X,Y)= X¹Y! a) (16 points) Using a clearly and accurately labeled Edgeworth Box, illustrate: • the initial endowment, labeled "W" . Each consumer's indifference curve at "W" The contract curve • The general equilibrium point, labeled "D" (you will have to come back to this later in the problem) • the budget constraint (you will have to come back to this later in the problem) b) (10 points) Suppose the price of Y is Py = 1. Calculate the value of each consumer's initial endowment after solving for the price of good X that will lead to a competitive equilibrium. Show your work. You may want to use part of the next page or the blank space on the front page to do your work. Write your final answers in the blanks below ΜΑ MB -

Answer rating: 100% (QA)

Answer Consumer A Initial endowmentsof good X and good Y 44 Utility function Min 2X Y PX 2 PY 1 Income of the consumer PXX PYY where X and Y are the e... View the full answer