Finding the equilibrium price ratio

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Question: In a pure exchange economy, consumers A and B exchange goods x and y. The utility function of consumer A is UA(xA,yA) = xAyA, and the utility function of consumer B is UB(xB,yB) = 3xB + 2yB. Consumer A's initial endowment is 2 units of good x and 3 units of good y, while consumer B's initial endowment is 4 units of good x and 3 units of good y. Neither of them can influence the prices of x and y. In pure competition, the equilibrium price ratio px/py is:

a) 3/2.

b) 3/5.

c) 2/3.

d) is not unambiguously defined " different price ratios are possible in the equilibrium.

e) None of the above

Reference no: EM132206678

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