Question

Consider a simple economy with two goods, food and clothing, and two consumers, A and B....

Consider a simple economy with two goods, food and clothing, and two consumers, A and B. For a given initial endowment, when the ratio of food to clothing prices in an economy is 3/1, A wants to buy 6 units of clothing while B wants to sell 2 units of food. Is PF/PC = 3 an equilibrium price ratio? If so, explain why. If not, State which direction it will tend to change.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

If you are satisfied with a answer plz upvote thank you​​​

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
Consider a simple economy with two goods, food and clothing, and two consumers, A and B....
Consider a simple economy with two goods, food and clothing, and two consumers, A and B. For a given initial endowment, when the ratio of food to clothing prices in an economy is 3/1, A wants to sell 3 units of clothing while B wants to sell 2 units of food. Is PF/PC = 3 an equilibrium price ratio?(Yes or No) If so, explain why. If not, state in which direction it will tend to change.(Increase, Decrease or No change)
Consider a simple economy in which there are only two consumers - Ann and Bill -...
Consider a simple economy in which there are only two consumers - Ann and Bill - and two goods, food and clothing. Suppose there is a total of 100 units of food and a total of 200 units of clothing. Ann’s endowment is 70 units of clothing and 75 units of food, while Bill’s endowment is 130 units of clothing and 25 units of food. Please use Edgeworth box to present this economy and point out the intial endowment of...
Complete the parts below: A consumer purchases two goods, food (F) and clothing (C). Her utility...
Complete the parts below: A consumer purchases two goods, food (F) and clothing (C). Her utility function is given by U(F,C)=FC+F. The marginal utilities are MUF=C+1 and MUC=F. The price of food is PF, the price of clothing is PC, and the consumer’s income is W. Suppose W=10. What is the demand curve for clothing? The demand for clothing is C=(10-Pc)/2Pc The demand for clothing depends on both prices It’s a downward sloping straight line The demand for clothing is...
Consider a pure exchange economy with two consumers, Ann (A) and Bob (B), and two commodities,...
Consider a pure exchange economy with two consumers, Ann (A) and Bob (B), and two commodities, 1 and 2, denoted by (x^A_1, x^A_2) and (x^B_1, x^B_2). Ann’s initial endowment consists of 20 units of good 1 and 5 units of good 2. Bob’s initial endowment consists of 0 unit of good 1 and 5 units of good 2. The consumers’ preferences are represented by the following Cobb-Douglas utility functions:U^A(x^A_1, x^A_2) = (x^A_1)^2(x^A_2)^2 and U^B=√x&B1√x^B2. Denote by p1 and p2 the...
A consumer purchases two goods, food (F) and clothing (C). Her utility function is given by...
A consumer purchases two goods, food (F) and clothing (C). Her utility function is given by U(F,C)=FC+F. The marginal utilities are MUF=C+1 and MUC=F. The price of food is PF, the price of clothing is PC, and the consumer’s income is W. Suppose W=10, PF=4, PC=6. What is the optimal bundle? Group of answer choices (F,C)=(1/3,1) (F,C)=(2,1) (F,C)=(2,1/3) (F,C)=(1,3)
Imagine an economy makes only clothes (QC) and food (QF) and has two inputs of production:...
Imagine an economy makes only clothes (QC) and food (QF) and has two inputs of production: Labor (L) and Capital (K). It takes 4 units of capital and 1 unit of labor to make one unit of clothing. It takes 1 unit of capital and 1 unit of labor to make one unit of food. There is no substitutability between the two inputs. Hint: the total cost of production, TC, is equal to the wL+rK. You can think of L...
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.
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...
Consider a simple economy consisting of three sectors: food, clothing, and shelter. The production of 1...
Consider a simple economy consisting of three sectors: food, clothing, and shelter. The production of 1 unit of food requires the consumption of 0.4 unit of food, 0.2 unit of clothing, and 0.2 unit of shelter. The production of 1 unit of clothing requires the consumption of 0.1 unit of food, 0.2 unit of clothing, and 0.3 unit of shelter. The production of 1 unit of shelter requires the consumption of 0.3 unit of food, 0.1 unit of clothing, and...
Consider a simple economy consisting of three sectors: food, clothing, and shelter. The production of 1...
Consider a simple economy consisting of three sectors: food, clothing, and shelter. The production of 1 unit of food requires the consumption of 0.4 unit of food, 0.2 unit of clothing, and 0.2 unit of shelter. The production of 1 unit of clothing requires the consumption of 0.1 unit of food, 0.2 unit of clothing, and 0.3 unit of shelter. The production of 1 unit of shelter requires the consumption of 0.3 unit of food, 0.1 unit of clothing, and...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT