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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.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M945044

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