1. Parci and Max both utility functions for goods A and B as U = 20A^0.25B^0.5 with marginal utilities MU_A = 5A^-0.75B^0.5 and MU_B = 10A^0.25B^-0.5. Prices are P_A = $2 and P_B = $1. Parci has income of $360 and Max has income $450.

A.Find the individual and total (market) quantities demanded for goods A and B.

B.Total supply of A is 140 units and B is 500 units. Draw the consumption and production combinations in a graph with an Edgeworth Box and Production Possibilities Frontier.

C.Explain (and show on your graph above) whether this economy is in a competitive equilibrium. If not, in which directions do you expect prices to change?

D.Explain the efficiency conditions that must be satisfied efficient allocation of resources in this economy.

E.Explain how the competitive equilibrium set of prices results in an efficient allocation of resources (efficiency conditions satisfied).