calculation is important.

4% General Equilibrium Alice and Bob have two divisible commodities denoted typically as r and y. Alice has 4 of r and 4 of y. Bob has 6 of a and 6 of y. Alice's preferences can be represented by the function UA(I, y) = 4Vit y and Bob's by UB(I, y) = 2VI+ y. The Pareto set (contract curve) in this economy is strange looking. It looks like the thick red line in this graphic: Page 3 of 4 SDU- However: This graphic is not drawn to scale! Do not copy it! Observe only that there is a vertical line in the interior; this is the only part of the Pareto set we will analyze. 1. Where should the vertical line be placed? 2. Find a Walrasian equilibrium (price and quantities). 3. Suppose instead that Alice is endowed with 8 units of z. Repeat 1 and 2. How has the relative price of z changed? How has welfare changed