Reference no: EM13864834
Suppose there are two consumers, A and B.
The utility functions of each consumer are given by:
UA = X2Y
UB = X*Y
Therefore:
? Consumer A: MUX = 2XY; MUY = X2
? Consumer B: MUX = Y; MUY = X
The initial endowments are:
A: X = 120; Y =6
B: X = 30; Y =14
a) Suppose the price of good Y, Py=1. Calculate the price of good X, Px that will lead to a competitive equilibrium.
b) How much of each good does each consumer demand in equilibrium?
Consumer A?s Demand for X:
Consumer A?s Demand for Y:
Consumer B?s demand for X:
Consumer B?s demand for Y:
c) What is the marginal rate of substitution for consumer A at the competitive equilibrium?
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