Microeconomics

User Generated

neavtvfy

Economics

Description

View an economy with two goods, x and y, and a production function, z. In this economy are two types of individuals, α and β and they have an equal number of individuals. Both have the utility function U(xi, yi) = min(xi, yi), where xi and yi is consumption i= α , β of x and y.

Each individual in α runs a business that produces good x and uses z as an input. Profit function is 4p. = -1 .

Each individual in β runs a business that produces good y and uses z as an input. Profit function is \pi ^{\beta }=\frac{p_{y}^{2}}{p_{z}} .

Initially, x and y do not exist but each individual in α and β have 10 z. Nobody alone can affect prices in the economy.

a) Find the supply functions and demand for the inputs for α and β.

b) Find equilibrium price in the economy.

User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Explanation & Answer

Attached.

1

ECONOMICS

Microeconomics – Cost Function
Student Name:
Institutional Affiliation:
Instructor:
Date:

2

ECONOMICS
MICROECONOMICS
a. Finding the supply functions and demand
The Supply Function
For good x;
Πα = P2x/ 4P
= 0.25Px, which is the supply functi...


Anonymous
Really great stuff, couldn't ask for more.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Related Tags