3. Sarah and Jane are two representative individuals living in an economy that produces two goods, X and Y Sarah's and Jane's utility functions are given as follows: Jane: U' = 100X0.5Y0.5 MUX = 50X-0.5y0.5 MUy = 50X0.5Y-0.5 Sarah: US = 50X04Y0.6 MUx = 20X-0.6Y0.6 MUy = 30X04Y-0.4 The market prices of X and Y are $10 and $20, respectively. Current outputs are 58 units of X and 36 units of Y. Jane's current income is $600, while Sarah's income is $700. a. Write out an expression for each consumer's marginal rate of substitution. b. Determine the quantities of X and Y that Sarah and Jane should consume in equilibrium. c. Do the values calculated in part (b) satisfy the conditions for equilibrium in exchange? Explain using numbers.

3. Sarah and Jane are two representative individuals living in an economy that produces two goods, X and Y Sarah's and Jane's utility functions are given as follows: Jane: U' = 100X0.5Y0.5 MUX = 50X-0.5y0.5 MUy = 50X0.5Y-0.5 Sarah: US = 50X04Y0.6 MUx = 20X-0.6Y0.6 MUy = 30X04Y-0.4 The market prices of X and Y are $10 and $20, respectively. Current outputs are 58 units of X and 36 units of Y. Jane's current income is $600, while Sarah's income is $700. a. Write out an expression for each consumer's marginal rate of substitution. b. Determine the quantities of X and Y that Sarah and Jane should consume in equilibrium. c. Do the values calculated in part (b) satisfy the conditions for equilibrium in exchange? Explain using numbers.

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section: Chapter Questions

Problem 19SQ

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