1. Consider a 2x2 static general equilibrium model (1 household, 2 goods A and B and 2 factors of production capital - K and labor - L) of a closed economy. The production functions of the two goods and the utility function of the household is of the Cobb-Douglas type. Share parameters of the utility function are both 0.5 while production of good A is more capital intensive than production of good B. The household endowments of K and L are fixed and the household does not derive any utility from leisure. Consider a moderate increase of the endowment of K. Describe the likely effects on:

   (a) the production of goods (b) the prices of goods and prices of factors of production

   (c) the utility level