Abduls utility is U(X A, Y A)= min{X A, Y A}, where X A and Y A are his consumptions of goods X and Y respectively.Babettes utility function is U(X B, Y B)= X B Y B, where X B and Y B are her consumptions of goods X and Y.Abduls initial endowment is no units of Y and 7 units of X.Babettes initial endowment is no units of X and 6 units of Y.If X is the numeraire good and p is the price of good Y, then supply will equal demand in the market for Y if
A)min{7, 6} + 7/2p = 6.
B)7/(p + 1)+ 3 = 6.
C)6/7 = p.
D)6/(p + 1)+ 3.50 = 6.
E)min{7, 6} + 6/2p = 6.

Question

Quizplus · Accepted Answer

Babette's utility function suggests she will consume both goods X and Y, implying she will demand Y. Abdul's utility function is not clearly stated due to formatting issues, but given his initial endowment, he might supply Y if it's profitable. The correct choice must balance the market for Y, considering both Abdul and Babette's actions. Choice B seems to correctly account for the price of Y (p) and the initial endowments, leading to a market equilibrium where supply equals demand for good Y.

Abduls Utility Is U(X A, Y A)= Min{X A, Y