1
G30 Microeconomics Assignment 2
2016-2017
Answer all questions. Where notation is provided, use that particular notation.
Where notation is not provided, use standard notation and explain what each symbol denotes.
Question 1 (40 Marks): Suppose that in a pure exchange economy (i.e. an economy without produc-
tion), we have two hobbits, Frodo and Sam, and two goods, Fish and Ale. Frodo and Sam have
the utility functions:
uf = Minfxff ; xaf g and us = Minfxfs; (xas)
1
2 g
where xff and xaf are Frodo’s consumption of sh and ale; xfs and xas are Sam’s con-
sumption of sh and ale.
Frodo starts with an endowment of 30 units of sh and none of ale, while Sam starts with an
endowment of 20 units of ale and none of sh. Neither can consume negative amounts of a good.
a. If both Frodo and Sam are price takers, what is the equilibrium? [20 Marks]
b. Suppose instead Frodo starts of with only 5 units of sh, while Sam’s initial endowment
remains the same. What happens now? [20 Marks]
Question 2 (30 Marks): Consider a pure exchange economy with i=1,2, where consumers have Cobb-
Douglas utility functions and !`i 0 8 ` = 1; 2 ^ i = 1; 2, where notation is standard.
a. Solve for the Walrasian (competitive) equilibrium price ratio, fp1
=p2
g.[20 Marks]
b. Discuss the implications for the Walrasian price ratio of a small negative change in !22.
[10 Marks]
Question 3 (30 Marks): Joey and Ross are the two consumers of our `Friends’ economy. There are 100
units of sandwiches and 100 units of salt water taes. Joey and Ross are each endowed with
50 units of each good. Joey says, `I can take or leave salt water taes, but I love sandwiches’.
Ross says, `I love salt water taes, but I can take or leave sandwiches’. Note: for parts (a) and
(b) you are not required to provide a mathematical approach. Also neither Joey’s nor Ross’
preferences are lexicographic.
a. Draw an Edgeworth box for our `Friends’ economy and sketch Joey and Ross’ prefer-
ences. Explain. [15 Marks]
b. Find all Walrasian equilibria for this economy and discuss. [15 Marks]
Dr Ufuk Gunes Bebek
Our Service Charter
-
Excellent Quality / 100% Plagiarism-Free
We employ a number of measures to ensure top quality essays. The papers go through a system of quality control prior to delivery. We run plagiarism checks on each paper to ensure that they will be 100% plagiarism-free. So, only clean copies hit customers’ emails. We also never resell the papers completed by our writers. So, once it is checked using a plagiarism checker, the paper will be unique. Speaking of the academic writing standards, we will stick to the assignment brief given by the customer and assign the perfect writer. By saying “the perfect writer” we mean the one having an academic degree in the customer’s study field and positive feedback from other customers. -
Free Revisions
We keep the quality bar of all papers high. But in case you need some extra brilliance to the paper, here’s what to do. First of all, you can choose a top writer. It means that we will assign an expert with a degree in your subject. And secondly, you can rely on our editing services. Our editors will revise your papers, checking whether or not they comply with high standards of academic writing. In addition, editing entails adjusting content if it’s off the topic, adding more sources, refining the language style, and making sure the referencing style is followed. -
Confidentiality / 100% No Disclosure
We make sure that clients’ personal data remains confidential and is not exploited for any purposes beyond those related to our services. We only ask you to provide us with the information that is required to produce the paper according to your writing needs. Please note that the payment info is protected as well. Feel free to refer to the support team for more information about our payment methods. The fact that you used our service is kept secret due to the advanced security standards. So, you can be sure that no one will find out that you got a paper from our writing service. -
Money Back Guarantee
If the writer doesn’t address all the questions on your assignment brief or the delivered paper appears to be off the topic, you can ask for a refund. Or, if it is applicable, you can opt in for free revision within 14-30 days, depending on your paper’s length. The revision or refund request should be sent within 14 days after delivery. The customer gets 100% money-back in case they haven't downloaded the paper. All approved refunds will be returned to the customer’s credit card or Bonus Balance in a form of store credit. Take a note that we will send an extra compensation if the customers goes with a store credit. -
24/7 Customer Support
We have a support team working 24/7 ready to give your issue concerning the order their immediate attention. If you have any questions about the ordering process, communication with the writer, payment options, feel free to join live chat. Be sure to get a fast response. They can also give you the exact price quote, taking into account the timing, desired academic level of the paper, and the number of pages.