13.12 Initial endowments and prices In Example 13.8, each individual has an initial endowment of 500 units of each good.

a. Express the demand for Smith and Jones for goods x and y as functions of p, and p, and their initial endowments.

b. Use the demand functions from part (a), together with the observation that total demand for each good must be 1,000, to calculate the equilibrium price ratio P./P, in this situation. What are the equilibrium consumption levels of each good by cach person?

c. How would the answers to this problem change for the following initial endowments? Smith's Endowment Jones's Endowment x y X i 0 1,000 1,000 0 600 600 400 400 400 400 600 600 iv 1,000 1,000 0 0 Explain these varying results.