Question

Suppose there are two consumers, A and B, and two goods, X and Y. Consumer A...

Suppose there are two consumers, A and B, and two goods, X and Y. Consumer A is given an initial endowment of 4 units of good X and 4 units of good Y. Consumer B is given an initial endowment of 4 units of good X and 4 units of good Y. Consumer A’s utility function is given by:

UA(X,Y) = X*Y4,

and consumer B’s utility function is given by

UB(X,Y) = X*Y.

Therefore, consumer A’s marginal utilities for each good are given by:

MUX =Y4

MUY = 4XY3

Also, consumer B’s marginal utilities for each good are given by:

MUX = Y

MUY = X

Suppose the price of good Y is equal to one. What price of good X will lead to a competitive equilibrium? Please round your answer to 4 decimal places.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. Suppose there are two consumers, A and B. The utility functions of each consumer are...
1. Suppose there are two consumers, A and B. The utility functions of each consumer are given by: UA(X,Y) = X*Y UB(X,Y) = X*Y3 Therefore: • For consumer A: MUX = Y; MUY = X • For consumer B: MUX = Y3; MUY = 3XY2 The initial endowments are: A: X = 10; Y = 6 B: X = 14; Y = 19 a) (40 points) Suppose the price of Y, PY = 1. Calculate the price of X, PX...
Suppose there are two consumers, A and B. The utility functions of each consumer are given...
Suppose there are two consumers, A and B. The utility functions of each consumer are given by: UA(X,Y) = X2Y UB(X,Y) = X*Y Therefore: For consumer A: MUX = 2XY; MUY = X2 For consumer B: MUX = Y; MUY = X The initial endowments are: A: X = 120; Y = 6 B: X = 30; Y = 14 a) (20 points) Suppose the price of Y, PY = 1. Calculate the price of X, PX that will lead...
Suppose there are two consumers, A and B. There are two goods, X and Y. There...
Suppose there are two consumers, A and B. There are two goods, X and Y. There is a TOTAL of 8 units of X and a TOTAL of 8 units of Y. The consumers’ utility functions are given by: UA(X,Y) = 4X + Y UB(X,Y) = X*Y For each of the following allocations, write TRUE if it is Pareto Efficient and FALSE if it is not: i) Consumer A gets 6 units of X and 2 units of Y, and...
1.Suppose there are two consumers, A and B. The utility functions of each consumer are given...
1.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) = 3X + 2Y The initial endowments are: A: X = 4; Y = 4 B: X = 4; Y = 12 a) (10 points) Using an Edgeworth Box, graph the initial allocation (label it "W") and draw the indifference curve for each consumer that runs through the initial allocation. Be sure to label your graph carefully and accurately....
Suppose there are two consumers, A and B, and two goods, X and Y. The consumers...
Suppose there are two consumers, A and B, and two goods, X and Y. The consumers have the following initial endowments and utility functions: W X A = 2 W Y A = 9 U A ( X , Y ) = X 1 3 Y 2 3 W X B = 6 W Y B = 2 U B ( X , Y ) = 3 X + 4 Y Suppose the price of X is PX=2 and the...
Suppose a consumer has the utility function U (x, y) = xy + x + y....
Suppose a consumer has the utility function U (x, y) = xy + x + y. Recall that for this function the marginal utilities are given by MUx(x,y) = y+1 and MUy(x,y) = x+1. (a) What is the marginal rate of substitution MRSxy? (b)If the prices for the goods are px =$2 and py =$4,and if the income of the consumer is M = $18, then what is the consumer’s optimal affordable bundle? (c) What if instead the prices are...
Consider an exchange economy with two consumers A and B, and teo goods X and Y....
Consider an exchange economy with two consumers A and B, and teo goods X and Y. A's utility function is Ua=X^(1/3)Y^(2/3) and B's utility function is Ub=X^(2/3)Y^(1/3). Initial endowments for A are (18,4) and for B are (2,6). Q. Suppose that B realizes he has market power and hence optimizes by controlling price. Individual A behaves as price taker. Formulate the optimization problem of individual B and solve the equilibrium.
Donna and Jim are two consumers purchasing strawberries and chocolate. Jim’s utility function is U(x,y) =...
Donna and Jim are two consumers purchasing strawberries and chocolate. Jim’s utility function is U(x,y) = xy and Donna’s utility function is U(x,y) = x2y where x is strawberries and y is chocolate. Jim’s marginal utility functions are MUX=y and MUy=x while Donna’s are MUX=2xy and MUy=x2. Jim’s income is $100, and Donna’s income is $150. Are strawberries a normal good or an inferior good for Jim? Explain your answer.
Suppose there are two goods, X and Y.  The price of good X is $2 per unit...
Suppose there are two goods, X and Y.  The price of good X is $2 per unit and the price of good Y is $3 per unit.  A given consumer with an income of $300 has the following utility function: U(X,Y) = X0.8Y0.2         which yields marginal utilities of: MUX= 0.8X-0.2Y0.2 MUY= 0.2X0.8Y-0.8         a.     What is the equation for this consumer’s budget constraint in terms of X and Y?         b.    What is the equation for this consumer’s marginal rate of substitution (MRSXY)?  Simplifyso you only have...
Consider a consumer whose preferences over the goods are represented by the utility function U(x,y) =...
Consider a consumer whose preferences over the goods are represented by the utility function U(x,y) = xy^2. Recall that for this function the marginal utilities are given by MUx(x, y) = y^2 and MUy(x, y) = 2xy. (a) What are the formulas for the indifference curves corresponding to utility levels of u ̄ = 1, u ̄ = 4, and u ̄ = 9? Draw these three indifference curves in one graph. (b) What is the marginal rate of substitution...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT