StudentShare solutions
• Home
• Subjects
• Marketing
• Marketing - The Competitive Equilibrium in an Exchange Economy and Its Representation Using an Edgeworth Box

# Marketing - The Competitive Equilibrium in an Exchange Economy and Its Representation Using an Edgeworth Box - Essay Example

Free

## Extract of sampleMarketing - The Competitive Equilibrium in an Exchange Economy and Its Representation Using an Edgeworth Box

126) The figure above indicates the consumption possibilities, the indifference curves and the budget constraints for the two consumers; Aisha and Robin. Let F represent food and C represent clothing; A=Aisha and R= Robin Therefore FA + FR= F and CA+CR= C The utility of Aisha, UA= FA + CA = B on the indifference curve The utility of Robin, UR= FR + CR = A on the indifference curve 1 A) Based on the figure above, points A and B indicates the pareto optimality points. These are the points at which the consumers will attain an efficient utility of the goods in the economy. At point A, Robin will be consuming the maximum he could for both the food and clothing. This is the point indicating how much he is ready and willing to lose for an equal amount from Aisha. In addition, at point A, Aisha is at optimal utility consuming a paltry UA= FA + CA while Robin has UR= FR + CR; this point indicates that Aisha though utilizing more of food than Robin she is satisfied as Robin utilize more clothes at this point than her. At point B, both consumers are efficiently utilizing the available goods. Robin is at, UR= FR + CR while Aisha is at UA= FA + CA. This point indicates that Robin is consuming more food than Aisha. To obtain an optimum exchange, Aisha utilizes more clothes than Robin. More over, points A and B lie on the indifference curves that measure the marginal rate of substitution of a given good for another by the consumers; UA and UR. Points A and B indicate the rates at which both Robin and

### Related Essays

Implications for an Economy of a Rising Exchange Rate
There are two types of foreign exchange rate, the spot exchange, and the term forward exchange rate. The first is defined as the rate that is currently applicable, while the latter is defined as the rate that is currently quoted and used for trading.
10 pages (2500 words) Essay
How equilibrium occurs using the aggregate supply (AS) and aggregate demand (AD) framework
The aggregate demand curve reflects price levels for goods and services produced domestically and which consumers, government, foreigners and businesses are willing to purchase. It slopes downwards to the right with the decrease in price levels with the increase in demand.
14 pages (3500 words) Essay
Consider a perfectly competitive market in long-run equilibrium where all firms operate under the same cost conditions. Suppose
Explain graphically and verbally what happens to the market in the short run and in the new long-run equilibrium if factor prices and demand are assumed to remain the same as before. Hint: You have to use two parallel diagrams, one for an individual (representative) firm and one for the industry.
4 pages (1000 words) Essay
Tescos Competitive Marketing Strategy
Tesco has chalked out many core marketing strategies to attain the above feats to remain as one of the world-leading retailers as of today and this research essay will analyse the Tesco’s core marketing strategies in detail and how it employed these core marketing strategies to become one of the globe’s retailer.
12 pages (3000 words) Essay
Equilibrium
Financial economists who study the world of stock investments define equilibrium similarly, as a condition where demand equals supply. Prior to reaching this state, stock prices go through a series of adjustments depending on the buy-hold-sell decisions of thousands of investors until equilibrium is reached.
5 pages (1250 words) Essay
Competitive Markets and Marketing Strategies
This strategy helps Toyota to appeal to the consumers' minds with offerings. Positioning of the new brand can be characterized by establishing trustworthiness, confidence, and competence for customers. This strategy is supported by the buying process and the pricing "Toyota wanted to get the jump on everyone else." (Burke, 2005).
2 pages (500 words) Essay
Competitive Marketing Strategy
In 2005, the company owns 1,984 sites of Pubs and Restaurants throughout the United Kingdom, and runs several well known retail brands in UK include the Vintage Inns, Ember Inns, Toby Carvery, etc ('What We Do', 2005). The company is still showing signs of active growth as it continues its rapid rate of corporate acquisitions.
6 pages (1500 words) Essay
BritFly,an established uk based airline, is planning its marketing strategy for the next 3 years in a very competitive market. one key objective is to grow the business. using a model,such as the Ansoff Matrix, identify and discuss the possible growth
The promising future potential of the Airline provides a clear strategic focus in order to sustain the foundation. The objective of the following analysis is proposal of marketing strategic growth plan for the next 3 years for British Airways, with
3 pages (750 words) Essay
Equilibrium
irms in the industry will maximizes its profits in the short run while they cannot make bigger profits through alteration of the prices of milk, thus, in the short run, the firm may make super-normal profits. In the short-run, the firms will not necessarily need to make profits
1 pages (250 words) Essay
Equilibrium
This translates to raising revenue. This is what is termed as price effect. On the other hand, after a price increase, in another dimension, it could also mean fewer units of the goods will be sold. This has the effect of lowering revenue. Price elasticity
1 pages (250 words) Essay
Aisha are willing to substitute either good and still remain on the same indifference curve (Mackintosh & Andrew Pg. 126). B) Neither point A nor point B is on the contract curve. This is because, points A and B indicates the pareto optimality of both consumers. They indicate the levels at which Aisha and Robin are efficiently utilizing food and clothes. Under point A and B, all the consumers are well off and none is better than the other. In the exchange box, a contract curve indicates all the emerging points that are not under pareto optimality. The points on the contract curve shows that the utility of one consumer can be increased only by decreasing the utility of the other consumer. Remarkably, contract curve shows all the pareto efficient points. Further more the indifference curves of both the consumers at tangential to each other. This is as indicated at point T where curve UA is tangential to curve UR. At this point, the marginal rate of substitution for both food and clothes is the same for Robin and Aisha (Mackintosh & Andrew pg.126) That is MRSAF, C = MRSRF, C C) Food has more demand than clothes. This is indicated in the above figure with both consumers have high initial amounts of food This is as shown at point P for Robin and point X for Aisha. From the indifference maps, it is indicative that, both Aisha and Robin have tried to maintain large amounts of food than clothing. Notably, the consumers’ marginal rate of substitution of food for clothes is low. More over, the indicated reductions in the amounts of food for both consumers are

## Summary

Title: Competitive equilibrium in an exchange economy and its representation using an Edgeworth Box Name: Course: Institution: In an exchange economy, it is every consumer’s goal to be at a competitive advantage than all other consumers. In the endevor to attain pareto optimality in consumption, several assumptions have been fronted in the analysis of attaining the desired efficiency…
Author : nkoepp