Consider an exchange economy with two goods

Assignment Help Business Economics
Reference no: EM131097609

Consider an exchange economy with two goods, good 1 and good 2, and two consumers, A and B. The preferences of the consumers can be described by a convex indifference curve. A’s initial endowment consists of 10 units of good 1 and 15 units of good 2, whereas B’s initial endowment consists of 20 units of good 1 and 5 units of good 2. Given the current price ratio p1/p2 , A would like to consume 15 units of good 1 and 10 units of good 2, whereas B would like to consume 12 units of good 1 and 15 units of good 2. Is the economy in equilibrium? If not, do you expect the equilibrium price ratio to be greater than the current price ratio? With the use of an appropriate diagram, explain your answer.

Reference no: EM131097609

Questions Cloud

What is paging : 1) Compare and contrast logical and physical addresses and address space. 2) What is paging? What are its advantages? Disadvantages? 3) Describe the page replacement process.
System is starting to thrash : Consider all the work the kernel has to do to map virtual to paging and all of the paging maintenance.... why do we say it is easier to create a thread than a process? What does it mean when you say a system is starting to thrash?
Design patterns to help form dynamic : Your final project will be a Java programming project that uses design patterns to help form dynamic web database application. Be sure that your code compiles and executes correctly before submitting.
Compute consumer surplus and producer surplus : The market demand for gadgets is given byQD=100-3p , where QD is the quantity of gadgets demanded and p is the price of a gadget in dollars. The market supply is given byQ S=p , where QS is the quantity of gadgets supplied. Compute consumer surplus, ..
Consider an exchange economy with two goods : Consider an exchange economy with two goods, good 1 and good 2, and two consumers, A and B. The preferences of the consumers can be described by a convex indifference curve. A’s initial endowment consists of 10 units of good 1 and 15 units of good 2,..
Calculate the profit-maximizing price-output combination : During recent years, Microchips Corp. has enjoyed substantial economic profits derived from patents covering a wide range of inventions and innovations for microprocessors used in high-performance desktop computers. Calculate the profit-maximizing pr..
Define and calculate the average product of labor : Suppose that a company produces output according to the following production function: Q=0.5L2.  Define & calculate the marginal product of labor. Define and calculate the average product of labor.
Marginal cost associated with producing in the two plants : You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 80-Q, where Q = Q1 + Q2. The marginal cost associated with producing in the two plants are MC1 = Q1 and MC2 = 8. How much output should be pro..
Different from the one facing firm in perfect competition : The monopolist’s marginal revenue is different from the one facing a firm in perfect competition because: (a) The price elasticity he faces is less than unity; (b) The price elasticity he faces is equal to unity; (c) The price elasticity he faces is ..

Reviews

Write a Review

Business Economics Questions & Answers

  Financial reimbursement cycle-economies of scale

Which of the following tools has not yet been used to constrain growth in hospital costs? Economies of scale. Payments to hospitals from private insurers can be characterized as having reached which stage of a typical financial reimbursement cycle?  ..

  Elucidate what is the calculation for a stock with a beta

Elucidate what is the calculation for a stock with a beta of -03, 07 and 1.6. Show calculations in 3 separate answeres.

  What do supply-siders think about the overall economy

What do Supply-Siders think about the overall economy? What Policy Levers do Supply Siders think should be used in this approach? Why is Supply-Side not accepted as an Economic Theory?

  Monetary transactions into a savings account

A credit card company wants your business. If you accept their offer and use their card, they will deposit 1% of your monetary transactions into a savings account that will earn a guaranteed 5% per year. If your annual transactions total an average o..

  Find the seven uniform annual deposits

Find the 7 uniform annual deposits that can provide a single withdrawal of $43,001.59, 6 years after the last deposit is made at an interest rate of 10.7% per year.

  What is present value of after-tax net returns for system

Mr. Agirich of Aggie Farms must choose between two alternative machinery investment programs which will perform equally. The following information is available. What are the annual gross revenues from System A in the 5th year? What is the present val..

  Why might deflation create problems for an economy

According to Keynes, why might deflation create problems for an economy?

  Examine the level of business activities

Examine the level of business activities in the U.S. economy over the past few months. Which trends do you find of interest? What stage of the Business Cycle is the U.S. economy, given the current levels of business activity? Use current data

  Illustrate what basic principles does production possibility

Illustrate what basic principles does production possibilities (or transformation) curve. Consider where an increase in production of one good requires an increase or decrease in production of or goods when K and L are held constant.

  Given the change in the budget constraint

Using the book Intermediate Microeconomics and its application by Walter Nicholson 12th Edition in Figure 5.1 7 - Given the change in the budget constraint, which of the following statements is TRUE A) The demand curve for good Y shifted inward B) Th..

  Baseball team and local stadium has commissioned study

The owner of a baseball team and local stadium has commissioned a study that showed the demand by fans for stadium seats (per playing date) to be P = 22 - 0.2Q, where P is the average price of a ticket and Q represents the number of seats (expressed ..

  Nash equilibrium

Nash equilibrium is:

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd