Suppose there are two consumers, A and B. The utility functions of each consumer

Question

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:

The initial endowments are:

A: X = 90; Y = 12

B: X = 60; Y = 8

a) (20 points) Suppose the price of Y, PY = 1. Calculate the price of X, PX that will lead to a competitive equilibrium.

b) (8 points) How much of each good does each consumer demand in equilibrium?

Consumer A%u2019s Demand for X:

Consumer A%u2019s Demand for Y:

Consumer B%u2019s demand for X:

Consumer B%u2019s demand for Y:

c) (4 points) What is the marginal rate of substitution for consumer A at the competitive equilibrium?

Explanation / Answer

Answer I moved x to the right side which got me -2y=3-x then divided each by 2 where i got an answer y=3-x/2 Is this right so far, or do I keep reducing? What you should do is divide by negative two. -2y=3-x y=-3/2 + x/2 usually the x term is placed before the constant y=x/2 -3/2 0r y=1/2 x -3/2 5 years ago

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.