There are 20 consumers in total out of which 10 consumers have income y = 10...

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There are 20 consumers in total out of which 10 consumers have income y = 10 and the other 10 consumers have income y;= 20. Each consumer has a Cobb-Douglas utility function given by, u'(x,q)=1/4q3/4 where x is a composite good with its price equal to 1. There are 15 firms, each with cost function (q)=2(rw) 1/2q3/2+r+w. (a) Find the short-run partial equilibrium price of good q. (b) Suppose now free entry and exit of firms is allowed. Find the equilibrium price and the equilibrium number of firms in the long-run. There are 20 consumers in total out of which 10 consumers have income y = 10 and the other 10 consumers have income y;= 20. Each consumer has a Cobb-Douglas utility function given by, u'(x,q)=1/4q3/4 where x is a composite good with its price equal to 1. There are 15 firms, each with cost function (q)=2(rw) 1/2q3/2+r+w. (a) Find the short-run partial equilibrium price of good q. (b) Suppose now free entry and exit of firms is allowed. Find the equilibrium price and the equilibrium number of firms in the long-run.

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Solution a ShortRun Partial Equilibrium Price Demand Since consumers have different incomeswe need to find the individual demands for each group Consumer group 1Income y1 10Price of composite good r 1 ... View the full answer