13.11 Walras' law Suppose there are only three goods (1,2,3) in an economy and that the excess demand functions for x and x3 are given by ED 3P2 2P3 + 1, P Pi 4P2 2P3 2. ED3 Pi - P1 -

a. Show that these functions are homogeneous of degree 0 in P1, P2, and P3-

b. Use Walras' law to show that, if ED, ED, = 0, then ED, must also be 0. Can you also use Walras' law to calculate ED?

c. Solve this system of equations for the equilibrium relative prices P/P and Pa/P. What is the equilibrium value for P3/P?