1. Consider the following version of the conspicuous consumption .
There are two individuals with utility functions:
U1= C^0.5 l^0.5(c1/c2)^0.25
U2=C^0.5 l^0.25 (C1/C2)^0,25
each player has initial endowment of 10 units of labor and 0 units of cars. There is also a single firm with production function fc(l) = l.
a) As in class, we could argue that market equilibrium requires Pl = Pc. Thus set Pl = Pc = 1 and and the market equilibrium allocation in this economy. (Hint: Remember that each player takes prices and the choices of the other player as given. In the solution each player will consume same basket of cars and labor/leisure. The answers will not be round numbers.) What is the utility of each agent?
b) Find the allocation that maximizes the sum of the utilities
(Hint: Each player will consume same basket of cars and labor/leisure.)
What is the utility of each agent?
I not able to find the solution since my answer are round number
thank you so much
There are two individuals with utility functions:
U1= C^0.5 l^0.5(c1/c2)^0.25
U2=C^0.5 l^0.25 (C1/C2)^0,25
each player has initial endowment of 10 units of labor and 0 units of cars. There is also a single firm with production function fc(l) = l.
a) As in class, we could argue that market equilibrium requires Pl = Pc. Thus set Pl = Pc = 1 and and the market equilibrium allocation in this economy. (Hint: Remember that each player takes prices and the choices of the other player as given. In the solution each player will consume same basket of cars and labor/leisure. The answers will not be round numbers.) What is the utility of each agent?
b) Find the allocation that maximizes the sum of the utilities
(Hint: Each player will consume same basket of cars and labor/leisure.)
What is the utility of each agent?
I not able to find the solution since my answer are round number
thank you so much