Question: economics question Consider two consumers i= A, B with identical preferences over goods j=x, y: Ui = xi yi. Assume the following endowments: EA= XA=

economics question

economics question Consider two consumers i= A, B with identical preferences over

Consider two consumers i= A, B with identical preferences over goods j=x, y: Ui = xi yi. Assume the following endowments: EA= XA= 2, yA= 8 and EB = (xB = 10 , yB = 2). Answer each of the following questions based on this information. Round your answer to the nearest second decimal place (i.e., .01). a). Calculate A's utility under autarky. b). Calculate B's utility under autarky. c). Suppose B gives A 4 units of x in exchange for 3 units of y. Calculate A's resulting utility. d). Suppose B gives A 4 units of x in exchange for 3 units of y. Calculate B's resulting utility. e). Starting from the outcome of the trade described above, are there any additional trades that could improve A's situation without hurting B or that could improve B's situation without hurting A? i). YES ii). NO iii). Maybe f). Calculate the price of good x in units of good y (or px/ py) that implies neither consumer would want to make any further trades beyond that described above. Comments

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!