Exercise 1: Endowment Economy
For the Endowment Economy described in Exercise 1, assume that the initial endowments are:
ωA x = 20(θ2 + 1); ωA y = 40; ωB x = 30; ωB y = 60θ2,
where θ = 1 + √B2 − 8B + 16, and B is the 2nd-to-last digit of your Student ID#.
a. Solve for the competitive general equilibrium relative price p∗.
b. Determine the competitive general equilibrium allocation (x∗A, y∗A, x∗B, y∗B)