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Consider an exchange economy with two prominent leaders: Romney and Bernanke. Each get utility from destroying jobs, J; and from power, P. Their utility functions are: URomney = ln(P) + 2 ln(J) UBernanke = 2ln(P) + ln(J) Their initial endowments are as follows:Romney: Power 40 Jobs 20. Bernanke Power 40 Jobs 10 Assume that both power and jobs to destroy are tradeable. a. What are the market supply functions for power and jobs? b. What is the income of both, expressed as a function of prices? c. What are the Marshallian demand functions for power and jobs (this should be J* and P*, expressed as functions of prices)? d. What is the market demand for power and jobs? e. Using what you have done for a-d, what are the equilibrium prices and allocations?

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Business Economics, Economics

Category:- Business Economics
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