EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 10.4, Problem 1MQ
To determine
To find: Point of the
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Consider the problem of an individual that has Y dollars to spend on consuming over
two periods. Let c, denote the amount of consumption that the individual would like
to purchase in period 1 and c2 denote the amount of consumption that the individual
would like to consume in period 2. The individual begins period 1 with Y dollars and
can purchase c1 units of the consumption good at a price P and can save any unspent
wealth. Use sı to denote the amount of savings the individual chooses to hold at the end
of period 1.
Any wealth that is saved earns interest at rate r so that the amount of wealth the
individual has at his/her disposal to purchase consumption goods in period 2 is (1+r)s1.
This principal and interest on savings is used to finance period 2 consumption. Again,
for simplicity, we can assume that it costs P2 dollars to buy a unit of the consumption
good in period 2.
2
The individual's total happiness is measured by the sum of period utility across time,
u(cı) + u(c2). Let u(c)…
Consider an economy with 3 agents, Mohammed (M), David (D) and Susan (S). There are two goods available, good x, and good y. The marginal rates of substitution (where good x is on the horizontal axis and good y is on the vertical axis) are given by for Mohammed, for David and for Mohammed and David are both consuming twice as much of the good x than good y, while Susan is consuming equal amounts of x and y.
A. What are the conditions for Pareto efficiency in an exchange economy?
B. Are these consumption levels economically efficient?
C. Can these consumption allocations be observed in a perfectly competitive equilibrium in an exchange economy without production? Explain.
Assume you are spending your full budget and purchasing such amounts of X and Y that the marginal utility from the last units consumed is 40 and 20 utils respectively. Assume (a) the prices of X and Y are $8 and $4 respectively; (b) it takes 3 hours to consume a unit of X and 1 hour to consume a unit of Y; and (c) your time is worth $2 per hour. In equilibrium, if you included the opportunity cost of time then, you
should substitute X for Y until the marginal utility per hour is the same for both products.
should consume X and Y in the equal amounts.
should consume less of Y and more of X.
should consume less of X and more of Y.
Chapter 10 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 10.2 - Prob. 1MQCh. 10.4 - Prob. 1MQCh. 10.4 - Prob. 2MQCh. 10.4 - Prob. 1.1MQCh. 10.5 - Prob. 1TTACh. 10.5 - Prob. 2TTACh. 10.7 - Prob. 1MQCh. 10.7 - Prob. 2MQCh. 10.7 - Prob. 3MQCh. 10.8 - Prob. 1TTA
Ch. 10.8 - Prob. 2TTACh. 10.8 - Prob. 1MQCh. 10.8 - Prob. 2MQCh. 10 - Prob. 1RQCh. 10 - Prob. 2RQCh. 10 - Prob. 3RQCh. 10 - Prob. 4RQCh. 10 - Prob. 5RQCh. 10 - Prob. 6RQCh. 10 - Prob. 7RQCh. 10 - Prob. 8RQCh. 10 - Prob. 9RQCh. 10 - Prob. 10RQCh. 10 - Prob. 10.1PCh. 10 - Prob. 10.2PCh. 10 - Prob. 10.3PCh. 10 - Prob. 10.4PCh. 10 - Prob. 10.5PCh. 10 - Prob. 10.6PCh. 10 - Prob. 10.7PCh. 10 - Prob. 10.8PCh. 10 - Prob. 10.9PCh. 10 - Prob. 10.10P
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