An economy has two agents, A and B, and two goods x1 and x2. The utility functions and endowments of the agents are given by: UA(4, a) = (rf)#(12) (ef, ef) (1, 2) || B eB (eP, ) (2, 1) %3D Suppose A and B trade on a Walrasian market as perfect competitors. Let the price of good 2 be fixed at 1, and the price of good 1 be p. (a) Find A's demand for good 1 as a function of p.e (b) Find B's demand for good 1 as a function of p. (c) Find the equilibrium price of good 1. Call this p*. (d) What are the net trades that occur between the two agents at these prices2k

An economy has two agents, A and B, and two goods x1 and x2. The utility functions and endowments of the agents are given by: UA(4, a) = (rf)#(12) (ef, ef) (1, 2) || B eB (eP, ) (2, 1) %3D Suppose A and B trade on a Walrasian market as perfect competitors. Let the price of good 2 be fixed at 1, and the price of good 1 be p. (a) Find A's demand for good 1 as a function of p.e (b) Find B's demand for good 1 as a function of p. (c) Find the equilibrium price of good 1. Call this p*. (d) What are the net trades that occur between the two agents at these prices2k

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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