Question

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.

Answer #1

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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 - 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 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, 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 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: 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.
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 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 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 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...

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