Consider a economy with three goods, a, b and c. The total supply consists 150a, 180b and 120c. There are three consumers 1,2,3 They have the followiing preferences: u1(a,b,c)=a u2(a,b,c)=a+b u3(a,b,c)=1+c a) Identify a competitive equilibrium from euqal incomes in which the price of a and c are equal. b) Find the egalitarian equivalent allocation(EEA is one that gives each agent the same utility as giving the one a fraction x of total supply, for x as large as possible)

Consider a economy with three goods, a, b and c. The total supply consists 150a, 180b and 120c. There are three consumers 1,2,3 They have the followiing preferences: u1(a,b,c)=a u2(a,b,c)=a+b u3(a,b,c)=1+c a) Identify a competitive equilibrium from euqal incomes in which the price of a and c are equal. b) Find the egalitarian equivalent allocation(EEA is one that gives each agent the same utility as giving the one a fraction x of total supply, for x as large as possible)

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter4: Prices: Free, Controlled, And Relative

Section: Chapter Questions

Problem 2WNG

See similar textbooks

Similar questions

Give typing answer with explanation and conclusion Suppose the cost of petrol is Rs. 100 per litre. There are two consumers who wish to purchase petrol for their cars: A and B. Consumer A goes to the petrol pump and asks for 10 litres of petrol. Consumer B goes to the petrol pump and asks for petrol worth Rs. 1000. (i) Find the equilibrium quantity demanded by each consumer. (ii) Draw the demand curves for each consumer. Are the two consumers identical? What is the price elasticity of demand for each consumer?
The figure shows the supply and demand for online music. Suppose that an economic downturn decreases household wealth and erodes consumer confidence. Move the supply and/or demand curves to reflect the primary effect this would have on the market for online music. You can assume that online music is a normal good. Also select the end result of equilibrium price and quantity. Equilibrium price increases. O remains constant. Equilibrium quantity increases. remains constant. decreases. O change is ambigous. decreases. change is ambiguous. Price (5 per track) Quantity (number of tracks) Supply Demand
Refer to the information provided in Figure 3.18 below to answer the question(s) that follow. 6 B S A 4 3 1.50 100 150 250 350 400 Q Millions of pounds of buritos Figure 3.18 Refer to Figure 3.18. The market is initially in equilibrium at Point A. If demand shifts from D1 to D2 and there is an excess demand of 150 million pounds of burritos, the price of burritos would be a. $1.50. - b. $3.00. Correct
Assume that coffee and tea are substitutes. John and Pamela are vendors at MANCOSA campus. John sells tea and Pamela coffee. They usually sell these drinks at R15 per cup, However, it is a cold Monday morning and Pamela decides to decrease the price of coffee to R12 a cup. The resultant effect would be movement along the demand curve for coffee takes place since it is a change in the price of coffee. Select one: O True O False
1.You have been recently employed as a consultant for a company that produces laptops in Ghana. Suppose the research department of the company have estimated the demand and supply curves of laptops and they are:2Qd + 0.5P − 24 = 0and 4Qs − 2P + 6 = 0You are to use this information toa. Determine the equilibrium level of prices and quantity demand.b. Represent your answer graphically and determine the welfare of economic agents.c. Suppose the government imposes a tax of ¢4 on every laptop sold, determine the new equilibrium price and quantity.d. Represent the new supply curve, old supply curve and the demand curve on a graph showing all equilibria.e. Show how the economic agents share the tax.f. What is the amount of government tax revenue?
The following diagram represents the market for hamburgers in Collegeville S2 D2 D Q3 Q4 Hamburgers per Month A change in equilibrium from A to D may be explained by Select one: Oa. a decrease in the price of beef patties ( a substitute to hamburgers) O b. an increase in the price of hotdogs (a substitute to hamburgers) coupled with an increase in the wages of restaurant employees a technological improvement in the production of hamburgers coupled with consumer concern about mad cow disease O d. a decrease in the price of fries (a complement to hamburgers) coupled with a reduction in the wages of restaurant employees Oe. an increase in Collegeville's student population Price of Hamburgers
Explain how the conditions for consumer equilibrium help to support the law of demand. Give an example with a diagram to support your answer
Identify the flaw in this analysis: “If more Trinidadians go on a vegan diet, thedemand for beef will fall. The decrease in the demand for beef will cause theprice of beef to fall. The lower price, however, will then increase the demand.In the new equilibrium, Trinidadians might end up consuming more beef thanthey did initially
Can consumer surplus be zero? If yes then in what scenario does this happen?
al The dernand and supply schedules for wine are above. Plot both in a graph. Find the equilibrium price and quantity b) if the price of wine is currently $30, what is this situation called in the market? Plot this scenario in same graph in part (a) c) For part (b), how big is the gap between what consumers want and what suppliers want? d) What would eventually happen to price and quantity in the market in part (b)?
• You are given a task for analysis the market for Sport Bike. You found that when the market price of bike is $500 the market demand is 9,200 bikes, whereas the market supply is 6,000 bikes. Yet, when the price rises to $650 the market demand is 6,800 bikes but the market supply is 8,000 bikes. Your tasks are: a) Define the equations of market demand and market supply for bike. b) Find the equilibrium-price and equilibrium– quantity and draw a graph to show this market. c) Estimate the consumers' surplus, producers' surplus and bike market's surplus.
3. Individual and market demand Suppose that Darnell and Eleanor are the only consumers of pizza slices in a particular market. The following table shows their weekly demand schedules: Price Darnell's Quantity Demanded Eleanor's Quantity Demanded (Dollars per slice) (Slices) (Slices) 1 8 14 2 6 10 3 4 6 4 2 3 1 On the following graph, plot Darnell's demand for pizza slices using the green points (triangle symbol). Next, plot Eleanor's demand for pizza slices using the purple points (diamond symbol). Finally, plot the market demand for pizza slices using the blue points (circle symbol). Note: Line segments will automatically connect the points. Remember to plot from left to right.