this question is for homework. Q.2. Consider a simple economy that produces two goods, beer (denoted by x) andquiche (denoted by y), using labor and capital (denoted by L and K, respectively) thatare supplied by two types of households, those consisting of wimps (denoted by W)and those consisting of hunks (denoted by H). Each household of hunks supplies 100units of labor and no units of capital. Each household of wimps supplies 10 units ofcapital and no units of labor. There are 100 households of each type. Both beer andquiche are produced with technologies exhibiting constant returns to scale. Themarket supply curves for beer and quiche arePz = wP, = wiptwhere w denotes the price of labor and r denotes the price of capital. The marketdemand curves for beer and quiche are given by20/w + 901HP. =80lw + 101µP,where X and Y denote the aggregate quantities of beer and quiche demanded inthis economy and IW and IH are the household incomes of wimps and hunks,respectively. Finally, the market demand curves for labor and capital are given byThere are four unknowns in our simple economy: the prices of beer and quiche, Px andPy, and the prices of labor and capital, w and r. Write the four equations that determinethe equilibrium values of these unknowns.

Q.2. Consider a simple economy that produces two goods, beer (denoted by x) and quiche (denoted by y), using labor and capital (denoted by L and K, respectively) that are supplied by two types of households, those consisting of wimps (denoted by W) and those consisting of hunks (denoted by H). Each household of hunks supplies 100 units of labor and no units of capital. Each household of wimps supplies 10 units of capital and no units of labor. There are 100 households of each type. Both beer and quiche are produced with technologies exhibiting constant returns to scale. The market supply curves for beer and quiche are P, = wri P, = wirt where w denotes the price of labor and r denotes the price of capital. The market demand curves for beer and quiche are given by 20/w + 901H P 801w + 101

Q.2. Consider a simple economy that produces two goods, beer (denoted by x) and quiche (denoted by y), using labor and capital (denoted by L and K, respectively) that are supplied by two types of households, those consisting of wimps (denoted by W) and those consisting of hunks (denoted by H). Each household of hunks supplies 100 units of labor and no units of capital. Each household of wimps supplies 10 units of capital and no units of labor. There are 100 households of each type. Both beer and quiche are produced with technologies exhibiting constant returns to scale. The market supply curves for beer and quiche are P, = wri P, = wirt where w denotes the price of labor and r denotes the price of capital. The market demand curves for beer and quiche are given by 20/w + 901H P 801w + 101

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter13: General Equilibrium And Welfare

Section: Chapter Questions

Problem 13.1P

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