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Astrid's Utility Function Is U(HA, CA)= HACA

question 45

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Astrid's utility function is U(HA, CA) = HACA.Birger's utility function is min{HB, CB}.If Astrid's initial endowment is no cheese and 13 units of herring and if Birger's initial endowments are 8 units of cheese and no herring, then where p is a competitive equilibrium price of herring and cheese is the numeraire, it must be that demand equals supply in the herring market.This implies that

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Definitions:

Supply Curve

A graph displaying the relationship between the price of a good or service and the quantity of that good or service that a supplier is willing and able to provide, holding all else equal.

Diminishing Marginal Product

A principle stating that as more of a variable input is added to a fixed input, the additional output produced from each additional unit of the variable input eventually decreases.

Marginal Costs

The supplementary cost arising from the manufacture of an extra unit of a good or service.

Variable Inputs

Inputs that can be adjusted in the short term to alter the level of output in the production process.

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