Consider a two-person general equilibrium with two economic agents A and B. Agent A's utility function is: U^(zf, ) = log(r{) + log(x4') %3D Agent B's utility function is: U (zf,) = 2 log af + %3D The endowments are: {(w, w), (w", w)} = {(1,2), (1,2)} %3D Denote the relative price by p >0. Part a Find the demands of Good 1 of Person A and B given an arbitrary relative price p. ** Part b .. Using the market clearing condition for Good 1, find the competitive equilibrium price p. Part c Solve for the contract curve in terms of (r, x).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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