Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder

تمرين 19

Suppose two individuals (Smith and Jones) each have 10 hours of labor to devote to producing either ice cream (X) or chicken soup (Y). Smith's demand for X and Y is given by
whereas Jones's demands are given by
where IS and 1/ represent Smith's and Jones's incomes, respectively (which come only from working).
The individuals do not care whether they produce X or Y and the production function for each good is given by
X = 2L
Y = 3L
where L is the total labor devoted to production ofeach good. Using this information, answer the following:
a. What must the price ratio, Px/Py be?
b. Given this price ratio, how much X and Y will Smith and Jones demand? (Hint: Set the wage equal to 1 here so that each person's income is 10.)c. How should labor be allocated between X and Y to satisfy the demand calculated in part b?