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## Suppose there are two consumers, A and B. The utility functi

Paper help Economics Suppose there are two consumers, A and B. The utility functi

# Suppose there are two consumers, A and B. The utility functi

Suppose there are two consumers, A and B. The utility functions of each consumer are given by: … Show more Suppose there are two consumers, A and B. The utility functions of each consumer are given by: UA(X,Y) = X 2 Y UB(X,Y) = X*Y Therefore: For consumer A: MUX = 2XY; MUY = X 2 For consumer B: MUX = Y; MUY = X The initial endowments are: A: X = 90; Y = 12 B: X = 60; Y = 8 a) (20 points) Suppose the price of Y, PY = 1. Calculate the price of X, PX that will lead to a competitive equilibrium. b) (8 points) How much of each good does each consumer demand in equilibrium? Consumer A%u2019s Demand for X: Consumer A%u2019s Demand for Y: Consumer B%u2019s demand for X: Consumer B%u2019s demand for Y: c) (4 points) What is the marginal rate of substitution for consumer A at the competitive equilibrium? must show work • Show less

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