Guy A:

Preferences are given by U = X^1/2Y^1/2

Initial Endowments of (X, Y) = (20, 80)

Martina (labeled M):

Preferences are given by U = X^1/3Y^2/3

Initial Endowments of (X, Y) = (30, 90)

Prices of goods X and Y are P_X= $4 and P_Y= $2

Is (P_X, P_Y) = (4, 2) a general equilibrium? (answer choices in parenthesis)

(Yes/No), because there is an (excess demand/excess supply) of (3,5,7,10,20) for good X and an (excess demand/excess supply) of (5,10,15, 20, 25) for good Y. The relative price of X = P_X/P_Ywill have to (rise/fall) in order for markets to clear.