Question: 1. (24 total points) Suppose there are two consumers, A and B, and two goods, X and Y. Their initial endowments of Good X and

1. (24 total points) Suppose there are two consumers, A and

1. (24 total points) Suppose there are two consumers, A and B, and two goods, X and Y. Their initial endowments of Good X and Good Y are: A: X = 4; Y = 14 B: X = 12; Y = 2 Consumer A's utility function is given by: UA(X,Y) = X*Y', And consumer B's utility function is given by UB(X,Y) = X*Y. Therefore, consumer A's marginal utilities for each good are given by: MUx = Y' MUy = 3XY Hero.com Also, consumer B's marginal utilities for each good are given by: MUx = Y MUY = X a) (8 points) Suppose the price of good Y is equal to one. Calculate the price of good X that will lead to a competitive equilibrium. Py = 1 WA = 4 MA = 8 MA = Px . X + Py . y = 4Px+ 14 4Px W! = 14 3 MA = 12 MB = 12 Px + 2 DA = DA + DB = WA + WE WX = 12 IS s D'B = MB = 8 4 Px+ 14 2 Px * 12 RX + 2 W 2P = 4+12 Me = 4 4 Px share 2 Py 4 Px + 14 + 24 RX + 4 = 16 x 4 28 Px + 18= 64RX 18= 36 PX MA = 4 Px + 14 = 2+14= 16 PX = +

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