6. Sheila and Bruce are havinga tea party. Sheila is bringing 12 ounces of tea (x) and 15finger sandwiches (y). Bruce isbringing 12 ounces of tea and 12 finger sandwiches.Sheila's and Bruce's preferences over tea and sandwiches can be represented by theutility functions: U*(x°,y*) = 6lm x³ + 17la y and UP(x".y") = la x³ + lm yB.a) What is Sheila's MRS at her endowment? What is Bruce's MRS at hisendowment? Is the endowment point Pareto efficient? Illustrate in an Edgeworthbox diagram the endowment point and a pair of indifference curves through theendowment point.Instead of trading directly with each other Sheila and Bruce trade with a market. Sheilaand Bruce are both price takers on both the tea and sandwich markets. Each can buy andsell a good at the same price. Let Px be the price of an ounce of tea and Py be the price ofa sandwich.b) Write the two equations that define the best bundle for Sheila given that the pricesare Px and Py. Do the same for Bruce.Consider the feasible allocation (x, y) = (14, 14) and (x", y") = (10, 13)%3Dc) Find the price ratio P =such that cost of Sheila's bundle (14,14) is equal tothe dollar value of her endowment. Verify that at the price ratio Bruce can affordto buy (10,13). Is this price ratio a General Equilibrium price ratio? Brieflyexplain your answer. Illustrate the budget line associated with this price ratio inyour Edgeworth box diagram.Now consider the feasible allocation (x, y) = (9, 17) and (x", y") = (15, 10).d) Find the price ratio P =such that cost of Sheila's bundle (9,17) is equal tothe dollar value of her endowment. Show that this price ratio is a GeneralEquilibrium price ratio.

Utility function: This is a mathematical function that measures the preferences/welfare/satisfaction…

6. Sheila and Bruce are having a tea party. Sheila is bringing 12 ounces of tea (x) and 15 finger sandwiches (y). Bruce is bringing 12 ounces of tea and 12 finger sandwiches. Sheila's and Bruce's preferences over tea and sandwiches can be represented by the utility functions: US(x,y) = 6l x5 + 17 ys and UB(x,y) = ln x³ + ln y a) What is Sheila's MRS at her endowment? What is Bruce's MRS at his endowment? Is the endowment point Pareto efficient? Illustrate in an Edgeworth box diagram the endowment point and a pair of indifference curves through the endowment point.

6. Sheila and Bruce are having a tea party. Sheila is bringing 12 ounces of tea (x) and 15 finger sandwiches (y). Bruce is bringing 12 ounces of tea and 12 finger sandwiches. Sheila's and Bruce's preferences over tea and sandwiches can be represented by the utility functions: US(x,y) = 6l x5 + 17 ys and UB(x,y) = ln x³ + ln y a) What is Sheila's MRS at her endowment? What is Bruce's MRS at his endowment? Is the endowment point Pareto efficient? Illustrate in an Edgeworth box diagram the endowment point and a pair of indifference curves through the endowment point.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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