1. Suppose there are two consumers, A and B.
The utility functions of each consumer are given by:
UA(X,Y) = X*Y
UB(X,Y) = X*Y3
Therefore:
• For consumer A: MUX = Y; MUY = X
• For consumer B: MUX = Y3; MUY = 3XY2
The initial endowments are:
A: X = 6; Y = 7
B: X = 14; Y = 13
a) Suppose the price of Y, PY = 1. find out the price of X, PX that will lead to a competitive equilibrium.