Adrienne and Sarah consume pizza Z and cola C. Their utility functions and marginal utilities are, respectively: SMU = CA MU = ZA' SMU; = 0.5Z50.5 C5 MU = 0.5Z95C50.5 %3D UA = ZĄCA = Us = Zg5Cg.5 → Finally, Adrienne's and Sarah's endowments are: ZA = 10, СА 3D 20, Zs = 20, Cs = 10 %3D a. What are the marginal rates of substitution for each person? b. Draw an Edgeworth box for this situation labelling the initial endowment and the indifference curves passing through it. Place Adrienne on the SW corner, and good Z on the vertical axis. C. Add the contract curve to the Edgeworth box. What is the formula for this curve? Hint: First, use the total endowments to express Cs and Zg in terms of C, and ZA. Then, recall that the MRSS are equal along the contract curve.

Adrienne and Sarah consume pizza Z and cola C. Their utility functions and marginal utilities are, respectively: SMU = CA MU = ZA' SMU; = 0.5Z50.5 C5 MU = 0.5Z95C50.5 %3D UA = ZĄCA = Us = Zg5Cg.5 → Finally, Adrienne's and Sarah's endowments are: ZA = 10, СА 3D 20, Zs = 20, Cs = 10 %3D a. What are the marginal rates of substitution for each person? b. Draw an Edgeworth box for this situation labelling the initial endowment and the indifference curves passing through it. Place Adrienne on the SW corner, and good Z on the vertical axis. C. Add the contract curve to the Edgeworth box. What is the formula for this curve? Hint: First, use the total endowments to express Cs and Zg in terms of C, and ZA. Then, recall that the MRSS are equal along the contract curve.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter6: Demand Relationships Among Goods

Section: Chapter Questions

Problem 6.9P

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If Utility =.5lnX++3Z+10+4√W then Marginal utility from W is...
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