Consider a two good economy where denotes consumption of apricots and denotes consumption of bananas. Anu's utility function is , and Binu's utility function is . Anu initially has no apricots and 12 bananas. Binu initially has 12 apricots and no bananas. In the competitive equilibrium, which one of the following will be Anu's optimal consumption bundle?
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Consider a two good economy where a denotes consumption of apricots and b denotes consumption of bananas. Anu's utility function is U^(Anu)(a,b) = a+2b, and Binu's utility function is U^(Binu)(a,b) = min {a,2b}. Anu initially has no apricots and 12 bananas. Binu initially has 12 apricots and no bananas. In the competitive equilibrium, which one of the following will be Anu's optimal consumption bundle? (A) 6 apricots and 9 bananas (B) 9 apricots and 9 bananas (C) 4 apricots and 10 bananas (D) 0 apricots and 12 bananas
General equilibrium and exchange economies has come up 69 times in 7 exams since 2004.
This question is on Competitive equilibrium in an exchange economy, part of General equilibrium and exchange economies in Microeconomics.
Finding the prices at which every consumer's chosen bundle clears the market.
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