Solution-How much of each good will each consumer choose

How much of each good will each consumer choose

Reference no: EM13948941

Suppose A and B live in an exchange economy with two goods x1 and x2. A owns 50 of both goods, and B own 250 of both goods.
A's tastes are captured by the utility functionuA(x1,x2) = x2 + 50lnx1
and B's are captured by the utility functionuB(x1,x2) = x2 + 100lnx1.

a. Let the competitive equilibrium prices be p1 and p2 respectively. Derive both consumers demand functions for both goods.

b. Find the relationship between p1 and p2 in equilibrium. Does the relationship depend on the endowments (assume interior solutions)? How much of each good will each consumer choose?

Reference no: EM13948941

Questions Cloud

Barter economy versus an economy : Would you be willing to give up your checkbook and instead use an electronic means of payment if it were made available? Why or why not?

What is current cost of common equity for firm-common stock : Underestimated Inc.’s common shares currently sell for $40 each. The firm’s management believes that its shares should really sell for $47 each. What is the current cost of common equity for the firm? what is the cost of common stock for Whitewall?

How you are feeling about your ability to make this change : Describe challenges you anticipate in your journey toward improving your health. Include an explanation of how you plan to overcome those challenges. Describe how you are feeling about your ability to make this change

Review and reflect on the diverse working environments : What were the most compelling points from the interaction with your fellow students - how does understanding leadership and diversity help you lead others through challenges associated with typical discriminatory behaviors in the workforce?

How much of each good will each consumer choose : Find the relationship between p1 and p2 in equilibrium. Does the relationship depend on the endowments (assume interior solutions)? How much of each good will each consumer choose?

What would be the cost of new equity : Cost of Common Equity with Flotation Ballack Co.’s common stock currently sells for $48.75 per share. The growth rate is a constant 9%, and the company has an expected dividend yield of 3%. The expected long-run dividend payout ratio is 25%, and the ..

Capital structure based on current market values : Capital Co. has a capital structure, based on current market values, that consists of 43 percent debt, 8 percent preferred stock, and 49 percent common stock. If the returns required by investors are 11 percent, 13 percent, and 18 percent for the deb..

Consumption and investment interest-related spending : The decrease in consumption and investment interest-related spending that occurs when the interest rate rises as government spending increases is called ________.

How might an hris application assist the business : HRIS NEEDS ANALYSIS: Review the shortfalls and challenges of the chosen area. Refer to the course reading for additional information on conducting a needs analysis. Answer the following: How might an HRIS application assist the business

User Account

All Pages

How much of each good will each consumer choose

Reference no: EM13948941

Reference no: EM13948941

Questions Cloud

Reviews

Write a Review

Corporate Finance Questions & Answers

Impact of the global economic crisis on business environment

Explain the short and the long-run effects on real output

Examine the requirements for measuring assets

Financial analysis report driven by rigorous ratio analysis

Calculate the value of the merged company

Stock market project

Write paper on financial analysis and business analysis

Intermediate finance

Average price-earnings ratio

Determine the financial consequences

Prepare a spread sheet model

Principles and tools for financial decision-making

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT