Consider an economy with two people who have the utility functions and initial endowments given below: U1 = = 2x11 + 12 = W1 2'2 =8 U2 = x21 + 2x22 W2 = a. Solve for a competitive equilibrium. b. Show that MRS person 1 = MRS person 2 doesn't hold at the competitive equilibrium. c. Is the competitive equilibrium allocation Pareto optimal? Why?
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- Bluth’s preferences for paper and houses can be expressed as Ub(p, h) = 2pb + hb, while Scott’s preferences can be expressed as Us(p, h) = ps + 2bs. Bluth begins with no paper and 10 houses, whereas Scott begins with 10 units of paper and no houses. 1. Is the starting endowment Pareto efficient? Justify your answer using an Edgeworth box? Determine whether each of the following price pairs is consistent with a competitive equilibrium. If yes, determine the resulting allocation of goods, sketching that equi- librium in your Edgeworth box. If not, explain why not (for what good is there a shortage, for what good is there a surplus?) pp =$3 and ph =$1 along with pp =$1 and ph =$1 Assume that the price of houses is $1. Given that price, determine the highest price pp that is consistent with a competitive equilibrium.1.) In an endowment economy with market exchange, let two consumers have preferences given by the utility function U^{h}=(x_{1}^{h})^{a}*(x_{2}^{h})^{1-a}for consumer h (1,2) with endowments given by\omega _{1}^{1}=6, \omega _{2}^{1}=4, \omega_{1}^{2}=4, and \omega_{2}^{2}=6. a.) Calculate the consumers' demand functions. b. Selecting good 2 as the measure of value (i.e. p2=1) and with alpha=1/4, find the equilibrium price of good 1 which implies equilibrium levels of consumption of both goods for both consumers. c. Demonstrate whether both consumers' indifference curves are tangential at the equilibrium. Demonstrate whether both consumers' indifference curves are tangential at the initial endowment.Two individuals, Fred and Helen, are in an economy with no production, and each have the utility function U = 10XY. Prices of both X and Y are set at $1. Initial endowments for Fred are 10 units of X and 6 units of Y. Helen has 8 units of X and 12 units of Y. Find the general equilibrium prices and allocation, then show that the G.E. allocation is Pareto efficient.
- I need help with this homework problem. Suppose there are two consumers, A and B. The utility functions of each consumer are given by: UA(X,Y) = (X^1/2)*(Y^1/2) UB(X,Y) = X + Y The initial endowments are: A: X = 8; Y = 3 B: X = 4; Y = 5 What is the marginal rate of substitution for consumer A at the initial allocation? What is the marginal rate of substitution for consumer B at the initial allocation? Is the initial allocation Pareto Efficient?Consider a market with M= 2 consumers and L = 2 goods. The preferences of each consumer are u₁(x₁) = min (x₁, x2} (6) U₂(x2) = X1X2 (7) Draw the Edgeworth box for this economy, where endowments are ₁ = (0,1) and ₂ = (1,0). Be sure to label the budget constraint, endowment point, equilibrium price ratio, equilibrium allocation, and the indifference curves of each consumer. Please do fast ASAP fastConsider a two-good exchange economy with two types of consumers. Type A have the utility function And an endowment of 3 units of good 1 and k units of good 2. Type B has the utility function And an endowment of 6 units of good 1 and 21 - k units of good 2. a. Find the competitive equilibrium outcome and show that the equilibrium price p* = p1/p2 of good 1 in terms of good 2 is p* = 21+k/15. b. Find the income levels (MA; MB) of both types in equilibrium as a function of k. c. Suppose that the government can make a lump-sum transfer of good 2, but it is impossible to transfer good 1. Use your answer to part b to describe the set of income distributions attainable through such transfers. Draw this in a diagram. d. Suppose that the government can affect the initial distribution of resources by varying k. Find the optimal distribution of income if (i) the SWF is W = log(MA) + log(MB) and (ii) W = MA + MB.
- consider an exchange economy with 2 goods (1 and 2) and 2 consumer (A and B). a bundle with x units of good 1 and y units of good 2 is written as (x,y). consumer A has an endowment (4,0) and consumer B has an endowment (12,12). the 2 goods are perfect substitutes for each consumer. consider an allocation in which A receives (1,9) and B receives (15,3) if we can redistribute endowments suitably, it is possible to obtain this allocation as the outcome of a competitive equilibrium. is this true or false? explain carefullyIn an exchange economy, there are two people (Shadi and Nino) and two goods (x1 and x2). Their initial endowments are ωS = (2, 4) and ωN = (3, 6). Their utility is given by the following functions: US(x1,x2) = x12x23 and UN(x1,x2) = x1x24. Which of the following is the equation for the contract curve? Group of answer choices a. x2N = 96x1N / (15 + 4x1N) b. x2N = 47x1N / (8 + 4x1N) c. x2N = 91x1N / 5 d. x2N = 16x1N / (3 + x1N) e. x2N = 41x1N / (9 + x1N)4. Aaron and Burris have the following utility functions over two goods, x and y. Aaron’s utility function: UA(xA, yA) = min{xA/3, yA} Burris’s utility function: UB(xB, yB) = 9xB + 3yB Aaron’s endowment is eA = (2, 4). Burris’ endowment is eB = (10, 8). In an Edgeworth Box diagram, show which allocations are in the core. Solve for the set of Pareto optimal allocations (i.e. the contract curve) in the Edgeworth Box. Illustrate the contract curve in an Edgeworth Box diagram. Let good y be the numeraire (i.e. set py = 1 and let px = p). Solve for the Walrasian competitive equilibrium allocation and price ratio.
- Consider an economy with 2 goods and 30 agents. There are 10 agentseach with the utility function u (x1; x2) = ln x1 + 2 ln x2 and endowments e = (3; 1).Also, the other 20 agents each have the utility function u (z1; z2) = 2 ln z1 + ln z2 andendowments e = (1; 2). Normalize p2 = 1. Calculate the Walrasian equilibrium pricep1*Person A has a utility function of and person B has a utility function Agent A and agent B have identical endowments of (1/2,1/2). (a) Illustrate this situation in an Edgeworth box diagram. (b) What is the equilibrium relationship between p1and p2? (c) What is the equilibrium allocation?Persons 1 and 2 have the following utility functions over goods x and y: Person 1: U1(x1, y1) = min{2x1, y1} Person 2: U2(x2, y2) = x2 + y2 Person 1 has an endowment of e1 = (2, 1). Betty’s endowment is e2 = (1, 2). Graph the Edgeworth Box for this economy. Draw each person’s indifference curve through the endowment point. Are there allocations that Pareto dominate the endowment? If so, show them on the diagram. Also, identify which allocations are Pareto optimal relative to the endowment point. Solve for the contact curve for this economy. Illustrate it in the Edgeworth Box.