Let Utility Function be U = min {X, Y} As given Endowment of Good 1 and Good 2 is 100 and 200 respectively. Suppose that price of good x increases from 10 to 15 and price of good y is 10 , then Calculate Endowment Income effect
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- Refer to figure. Suppose the consumer is endowed with 10 units of orange and consumes 5 units of apple. The price of the apple decreases and at the new price the consumer consumes 9 units of apple. The change in the demand for apples due to the endowment effect is equal to_____Refer to figure. Suppose the consumer is endowed with 10 units of orange and consumes 5 units of apple. The price of the apple decreases and at the new price the consumer consumes 9 units of apple. The change in the demand for apples due to the endowment effect is equal to Optionsa) 3b) 4c) 1d) none of thesePersons 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.
- A and B consume only two goods, cider (C) and dumplings (D). A has an initial endowment of 10 bottles of C and 30 of D. Bob has an initial endowment of 50 bottles of cider and 50 dumplings. Alice’s utility function is uA(CA,DA) = 9ln(CA) + 10ln(DA), where CA and DA represent consumption of C and D, respectively. B’s utility function is uB(CB,DB) = CBXDB, where CB and DB denote B's consumption of C and D. a) Find the competitive equilibrium, i.e. the price ratio, of this exchange economy and the resulting equilibrium allocation. b) Find the expression of the contract curve for this economy and use your answer to check that the equilibrium allocation you found in (b) is indeed Pareto optimal.Maude considers roses and tulips to be perfect substitutes. She spends $20 on these flowers Initially the price of roses is $1 and the price of tulips is $2. Then the price of roses changes to $3. Calculate the total change in demand for tulips. How large is the income effect? How large is the substitution effect? Now assume that Maude’s original income of $20 resulted from an initial endowment of 20 roses. What is the endowment income effect on the demand for tulips of the increase in the price of roses to $3?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?
- (In this question, differently from our lecture notes, income will be denoted by Y, not W). The following figure shows a two-good consumption space for an agent. The horizontal axis measures good x and the vertical axis measures good y. There are three budget lines shown in the figure. The first budget line has vertical intercept Y/py and horizontal intercept Y/px. The second budget line has vertical intercept Y/p’y<2, and horizontal intercept Y/px. The third budget line has vertical intercept Y/py, and horizontal intercept Y/p’x<3. There are two indifference curves. These are downward sloping thin curves that do not touch. One of this curves intersects the third budget line only at bundle (3,2). The other curve intersects the second budget line only at (4,0.6) and intersects the third budget line only at (1,2.5). Then Qy(p’x,p’y,Y), the demand of good y for prices p’x and p’y and income Y is less than 2? True. False.(In this question, differently from our lecture notes, income will be denoted by Y, not W). The following figure shows a two-good consumption space for an agent. The horizontal axis measures good x and the vertical axis measures good y. There are three budget lines shown in the figure. The first budget line has vertical intercept Y/py and horizontal intercept Y/px. The second budget line has vertical intercept Y/p’y<Y/py, and horizontal intercept Y/px. The third budget line has vertical intercept Y/py, and horizontal intercept Y/p’x< Y/px. There are two indifference curves. These are downward sloping thin curves that do not touch. One of this curves intersects the third budget line only at bundle (3,2). The other curve intersects the second budget line only at (4,0.6) and intersects the third budget line only at (1,2.5). Then Qx(px,py,Y), the demand of good x for prices px and py and income Y is: 4 1 2.5 2 3Consider an economy with 2 goods and 2 identical agents, each of whom has the following utility function, u (x1; x2) = ln x1 + 2 ln x2. The aggregate endowments of the 2 goods are given by (1; 2). Suppose there is a social planner who cares about agents equally.(a) Set up the plannerís problem. Calculate the first-best outcome
- Suppose that consumer I has the utility function u(x,y) = x + 2y and consumer II has the utility function u(x,y) = min{x, 2y}. Consumer I initially has 12 units of y and zero units of x, while consumer II has 12 units of x and zero units of y. It is correct to state that, in competitive equilibrium, the agents' consumption basket will be:Bob enjoys cookies (x) according to the utility function U(x)=20x- 2 tx , where t is a parameter that reflects how hungry he is. Cookies are costless in Bob’s world and so there is no income constraint. Using the envelope theorem, calculate how Bob’s maximum utility from eating cookies varies with t.(In this question we denote income by Y, not by W as in the lecture notes). The following figure shows a two-good consumption space for an agent. The horizontal axis measures good x and the vertical axis measures good y. There are three budget lines shown in the figure. The first budget line has vertical intercept Y/py and horizontal intercept Y/px. The second budget line has vertical intercept Y/p’y<Y/py, and horizontal intercept Y/px. The third budget line has vertical intercept Y/py, and horizontal intercept Y/p’x< Y/px. There are two indifference curves. These are downward sloping thin curves that do not touch. One of this curves intersects the first budget line only at bundle (3,2). The other curve intersects the second budget line only at (4,0.6) and intersects the third budget line only at (1,2.5). Can we conclude that good y is a Giffen good for some market situation? No. Yes.