HW_08 - Economics 11, Winter 2010; HW Assignment #8 Due...

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Unformatted text preview: Economics 11, Winter 2010; HW Assignment #8 Due 3:15PM Thursday March 4 1. In class we found the competitive equilibrium in the Robinson Crusoe economy with Cobb-Douglas utilities and with CES utilities with expo- nents 1 / 2. Consider the Robinson Crusoe economy with CES utilities with exponents < 1. That is two goods: c,` one consumer e = (0 , 1) u ( c,` ) = c + ` one firm, production function c = A` The constants A , are parameters of the economy. (a) Find the competitive equilibrium when =- 1 (your answer will involve A ). (b) What happens to equilibrium utility when A increases (that is the technology gets better)? (c) What happens to equilibrium choice of leisure when A increases (that is the technology gets better)? (d) Find the competitive equilibrium as a function of (your answer will involve A and ). (e) What happens to utility when we fix but A increases (that is the technology gets better)?...
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HW_08 - Economics 11, Winter 2010; HW Assignment #8 Due...

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