Consider a simple economy with two goods, clothing and food, and
two consumers Jacob and Will. Jacob is endowed with 100 units of
clothing and 100 units of food. Will is endowed with zero units of
clothing and 200 units of food. Suppose that Jacob’s optimal demand
for clothing is C = 50 + 50PF /
PC where PF is the price of
food and PC the price of clothing. Will’s
optimal demand for clothing is C =
100PF / PC.
a. Suppose that PC = 2 and PF = 4. Draw the Edgeworth box, initial allocation and budget constraint.
Consider a simple economy with two goods, clothing and food, and two consumers Jacob and Will....
Consider a simple economy with two goods, shelter and food, and two consumers Brian and Davina. Brian is endowed with 200 units of shelter and 200 units of food. Davina is endowed with 100 units of shelter and 300 units of food. Suppose that Brian’s optimal demand for shelter is S = 100. Davina’s optimal demand for shelter is S = 50 + 150PF / PS where PS is the price of shelter and PF the price of food. a....
Consider a small open economy (e.g. the Netherlands) producing two goods, clothing and food. The clothing industry uses capital (K) and labor (LC) as inputs, while the food industry uses land (La) and labor (LF ) as factors of production. The production technologies for the two industries are given by QC = K ¼ LC 3/4 ; QF = La1/2L F 1/2 . Also, the country is endowed with 216 units of capital, 360 units of labor, and 9 units...
1. Consider the following exchange economy. There are two goods (1 and 2) and two consumers (A and B). Preferences and endowments are as follows: uA (イ·攻)-玲攻 TA _ (0,2) 2(4,0) (a) Draw an Edgeworth Box diagram to depict this economy. Your diagram should be clearly labelled, and should include the autar kic allocation as well as a couple of indifference curves for each consumer. (Indifference curves for A do not need to be precisely accurate but those for B...
Consider an exchange economy with two consumers, A and B, who can consume only two goods. Suppose consumers’ preferences are represented by a Cobb- Douglas utility function of the form u(x1i,x2i) = x1ix2i (here i is for consumer A or B) for a consumption bundle of two goods (x1i,x2i). The consumers have endowments eA = (e1A;e2A) = (4;1) and eB = (e1B;e2B) = (1;4). The price of good 1 is p1 and the price of good 2 is p2. You...
Nora consumes only two goods (food and clothing) and her preferences for these goods can be represented by the following utility function UF,C=F2C where F is the quantity of food consumed and C is the amount of clothing consumed respectively. Suppose Nora’s allocated monthly income on the two goods is $M and the prices of the two goods (food and clothing) she prefers are $PF for food and $PC for clothing. Using the above information write Nora’s utility maximization problem...
In a simple economy, people consume only two goods: food and clothing. The market basket of goods used to compute the CPI has 30 units of food and 12 units of clothing. Food Clothing Last year’s price $ 10 $ 12 This year’s price $ 14 $ 15 a) What are the percentage increases in the price of food? b) What are the percentage increases in the price of clothing? c) What is the percentage increase in the...
C1 [19 marks] Suppose Malcolm and Barnaby are the only two people in a pure exchange economy. Food and clothing are the only two commodities. Malcolm is endowed with 30 units of food and 10 units of clothing, while Barnaby is endowed with 10 units of food and 30 units of clothing. Let F = units of food and C = units of clothing. Malcolm’s utility function is UM = 2 min(F, C) and Barnaby’s utility function is UB =...
Description of the economy: For each of the following problems, consider a 2x2 Exchange Economy with two consumers A and B, and two goods X and Y . The preferences of consumer A can be represented by the utility function uA(xA, yA) = xAyA , where xA is the amount of good A consumed by consumer A, and yA is the amount of good Y consumed by consumer A. The preferences of consumer B can be represented by the utility...
Please consider an individual that consumes two goods – Food (F) and Clothing (C) – and has a Cobb- Douglas Utility Function of the form U= 10 F^(2/3)* C^(1/3) a) Write the functions for the demand curves for Food and Clothing b) What is the maximum utility that can be attained when Income=1000, Pf = 5 and Pc = 20? c) What is the minimum expenditure necessary to attain Utility = 500?
Consider a pure exchange economy two consumers, Rachel and Lauren, and two commodities, watermelon and tomatoes. Rachel’s initial endowment is 4 units of watermelon and 3 units of tomatoes. Lauren’s initial endowment is 2 units of watermelon and 5 units of tomatoes. Rachel and Lauren have identical utility functions: Rachel’s utility is UR(WR,TR) = WRTR where WR and TR is Rachel’s quantity of watermelon and quantity of tomatoes, respectively; similarly, Lauren’s utility is UL(WL,TL) = WLTL where WL and TL...