Using an Edgeworth box: If two consumers view shoes and socks to be perfect complements and the world is endowed with 1000 units of socks and 600 units of shoes, derive the contract curve for this economy.
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Using an Edgeworth box:
If two consumers view shoes and socks to be perfect complements and the world is endowed with 1000 units of socks and 600 units of shoes, derive the contract curve for this economy.
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- Consider a simple economy with two individuals (A and B) and two goods (x and y). Can you draw the Edgeworth Box Diagram and explain the contract curve?a pareto efficient allocation should always be on the contract curve . Discuss this sentenceConsider an exchange economy with 2 agents and 2 goods. In an Edgeworth-Bowley diagram, show and illustrate that if both agents have the same preferences, the contract curve is a straight line from the bottom left-hand corner to the top right-hand corner. Does it follow that if the agents do not have the same preferences, the contract curve is not a straight line? Suppose the two agents have the same endowments and the same preferences. Is mutually beneficial trade possible? Illustrate in an Edgeworth Bowley diagram. State and explain Walras Law. What are the implications of Walras’s Law? Illustrate Walras Law in an Edgeworth-Bowley diagram.
- Dear tutor, please solve these True/False Questions. Thank You! Can it be efficient for one trader to consume all units of the goods while the other trader consumes nothing? In other words, does this point lie on the contract curve? A competitive equilibrium is not Pareto efficient if some members of society are unable to afford a necessary good.Consider a couple whose behaviour follows the unitary household model. Their preferences can be represented by the utility function: U(CM; CH) = min (CM, CH), where CM, denotes market goods and CH denotes home production. Each spouse can work up to 50 hours per week, and those 50 hours can be divided between market work and home production. Joe and Anna are each paid £20 per hour for market work. Joe produces £20 of home production per hour, while Anna produces £30 per hour of home production. (a)How many hours are each of the spouses allocating to home production and market work? and Suppose that Anna is offered a pay raise, so that her hourly market wage increases to £25, and nothing else changes. Will that change the identity of the spouse who works more hours on the market? Explain your answer.Grapes and bananas are perfect complements for Jane and Betty. Jane eats one grape per three bananas.; Betty eats three grapes per one banana. Once they go to sports for hours, Jane had 20 grapes and 10 bananas and Betty had 10 grapes and 20 bananas. (assume that grapes and bananas can be divided into half) 1. Draw the Edgeworth box for Jane and Betty. Place Jane at the origin and Betty on the upside-down. Draw their endowment point. (Grape on the horizontal axis and banana on the vertical)
- Which of the following is true at the exchange equilibrium between two individuals? A. Their marginal rates of substitution are equal. B. The slopes of the individuals' indifference curves are equal. C. Both individuals' marginal rates of substitution are equal to the ratio of the prices of the goods. D. A and B only E. A, B, and C are all true.Use the Fundamental Theorem of Exchange and draw Edgeworth Box diagrams to show the conditions necessary for an 'efficient' allocation of two goods between two individuals. Use this model to evaluate the statement: "If two individuals have identical endowments of both goods there are no possible gains from trade". Hint: you need to develop your explanation of the theory and the efficiencyconditions step-by-step. You need to draw several diagrams showing Edgeworth BoxConsider an economy with 3 agents, Mohammed (M), David (D) and Susan (S). There are two goods available, good x, and good y. The marginal rates of substitution (where good x is on the horizontal axis and good y is on the vertical axis) are given by 〖MRS〗_xy^M = 〖2y〗_M/x_M for Mohammed, 〖MRS〗_xy^D = 〖2y〗_D/x_D for David and 〖MRS〗_xy^S = y_S/x_S for Mohammed and David are both consuming twice as much of the good x than good y, while Susan is consuming equal amounts of x and y. What are the conditions for Pareto efficiency in an exchange economy?
- Consider an economy with 3 agents, Mohammed (M), David (D) and Susan (S). There are two goods available, good x, and good y. The marginal rates of substitution (where good x is on the horizontal axis and good y is on the vertical axis) are given by 〖MRS〗_xy^M = 〖2y〗_M/x_M for Mohammed, 〖MRS〗_xy^D = 〖2y〗_D/x_D for David and 〖MRS〗_xy^S = y_S/x_S for Mohammed and David are both consuming twice as much of the good x than good y, while Susan is consuming equal amounts of x and y. What are the conditions for Pareto efficiency in an exchange economy? Are these consumption levels economically efficient? Can these consumption allocations be observed in a perfectly competitive equilibrium in an exchange economy without production? Explain.An exchange economy consists of two individuals and two goods. The two individuals have the following Leontief utility functions: Person 1: U1(x1, y1) = 3x1 + y1 Person 2: U2(x2, y2) = x2 + 2y2 Person 1 has an endowment of e1 = (3, 2). Person 2’s endowment is e1 = (3, 4). In an Edgeworth Box diagram, show which allocations are in the core. Describe 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). What price ratio(s) P* will support a competitive equilibrium allocation for this economy?True false question. Can it be efficient for one trader to consume all units of the goods while the other trader consumes nothing? In other words, does this point lie on the contract curve?