Suppose the economy has 100 units each of goods X and Y and the utility functions of the (only) 2 individuals are: UA (XA,YA) = X0.25Y 0.75, UB (XB,YB) = X0.75Y 0.25 . Show that pareto-improvement is possible if, initially, goods are divided equally between the two individuals.
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Suppose the economy has 100 units each of goods X and Y and the utility functions of the (only) 2 individuals are: UA (XA,YA) = X0.25Y 0.75, UB (XB,YB) = X0.75Y 0.25 . Show that pareto-improvement is possible if, initially, goods are divided equally between the two individuals.
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- If the initial distribution of two goods between two people is Pareto optimal, which of the following statements is TRUE? A. It is possible to reallocate the goods between the two people so as to increase the utility of both people. B. It is possible to reallocate the goods between the two people so as to increase the utility of one person without decreasing the utility of the other. C. It is possible to reallocate the goods between the two people so as to increase the utility of one person, but only at the expense of the other person. D. It is impossible to reallocate the goods between the two people so as to increase either person's utility. E. None of the aboveIs the pareto principle generally accepted as true or accurate? Or is it considered not true?If the marginal utility of the burger is greater than the price of the burger, we expect a rational consumer_______. Group of answer choices to spend more money on pizza. to purchase more burgers. to spend more money on beverages. to purchase less burgers.
- If an allocation is Pareto optimal and if indifference curves between the two goods have no kinks, then (Select all that applies) Group of answer choices a. two consumers who consume both goods must have the same MRS between them, but consumers may consume the goods in different ratios. b. two consumers with the same income who consume both goods must have the same MRS, but if their incomes differ, their MRSs may differ. c. any two consumers who consume both goods must consume them in the same ratio. d. for any two consumers who consume both goods, neither will prefer the other consumer’s bundle to his own. e. all consumers receive the bundle that they prefer to any other bundle the economy could produce for them.Prove that the utility maximization conditions as suggested by the “marginal utility framework” are consistent with the “indifference curves approach”.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:
- Which of the following statements is true? Select one or more options: a-If two different individuals have exactly the same budget constraint but different preferences (different appearance of the indifference curves) then they will have different equilibrium conditions for optimal choice b-The marginal substitution ratio is always equal to 1 for perfect substitutes c-If item X costs SEK 10, item Y costs SEK 20 and if the marginal benefit for X is 20 and the marginal benefit for Y is 30, then the individual should buy more of Y and less of X d-In the case of a corner solution for an individual, the marginal substitution ratio for two goods is not equal to the relative price of the two goodsEvaluate the one specific law which states that the marginal utility of a good orservice declines as more of the good or service is consumed in a specific timeperiod.Which of the following statements is true? Group of answer choices If the more is better assumption is satisfied, the marginal utility from consuming the second unit must be greater than the marginal utility from consuming the first unit. Marginal utility is the slope of total utility. If the more is better assumption is satisfied, total utility will increase as consumption increases. Marginal utility may be negative.
- Individuals in a market each have a total budget y to spend on two goods q1 and q2 at the prices p1and p2 respectively. Their preferences are described by the utility function below. As in part (a), how can I show the demand of good 2?Consider the utility functions below of two individuals, A and B, and bundles of goods Q and R. UA=X0.5Y0.5; UB=X+2Y; Bundle Q (10, 10); Bundle R (10, 15). Suppose the total X and total Y available in the economy are both equal to 20. a. If initially both individuals are consuming bundle Q, then a pareto-improvement is possible through reallocation of goods, i.e. individual A gives B some of his good X in exchange for some of individual B’s good Y. (True or False? Explain through mathematical examples).b. Pareto-optimality is achieved if we give individual B Bundle R and the remaining goods X and Y available in the economy is given to individual A. (True or false? Explain through a graphical example)For the case of two goods, give examples of different two utility functions that satisfy all of the following properties: (i) one utility is strictly concave in good 1 and the other is strictly convex in good 2; (ii) they represent the same preferences; and (iii) one utility function is homogeneous of degree 2.
