Pablo and Marci both have marginal utilities for goods A and B as MUA = 3A-0.9B0.1 and MUB = 15A0.1B-0.9. Prices are PA = $5 and PB = $3. Pablo has income $5,000 and Marci has income $100. You may work in groups on this assignment if you choose. Find the individual and total (market) quantities demanded for goods A and B. Total supply of A is 200 units and B is 1275 units. Draw the consumption and production combinations in a graph with an Edgeworth Box and Production Possibilities Frontier. Explain (and show on your graph above) whether this economy is in a competitive equilibrium. If so, explain why. If not, explain in which directions you expect prices to change. Explain the efficiency conditions that must be satisfied efficient allocation of resources in this economy. Explain how the competitive equilibrium set of prices results in an efficient allocation of resources (efficiency conditions satisfied).

Pablo and Marci both have marginal utilities for goods A and B as MUA = 3A-0.9B0.1 and MUB = 15A0.1B-0.9. Prices are PA = $5 and PB = $3. Pablo has income $5,000 and Marci has income $100. You may work in groups on this assignment if you choose. Find the individual and total (market) quantities demanded for goods A and B. Total supply of A is 200 units and B is 1275 units. Draw the consumption and production combinations in a graph with an Edgeworth Box and Production Possibilities Frontier. Explain (and show on your graph above) whether this economy is in a competitive equilibrium. If so, explain why. If not, explain in which directions you expect prices to change. Explain the efficiency conditions that must be satisfied efficient allocation of resources in this economy. Explain how the competitive equilibrium set of prices results in an efficient allocation of resources (efficiency conditions satisfied).

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter5: Consumer Choice: Individual And Market Demand

Section: Chapter Questions

Problem 2TY

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