Consider a general equilibrium with two persons AA and BB.

• Person A's utility function is: UA(xA1,xA2)=xA1xA2
• Person B's utility function is: UB(xB1,xB2)=xB1xB2

and that the endowments are:

{(A1,A2),(B1,B2)}={(6,4),(0,2)} that Person B has no endowment of Good 1.

** Part a (5 marks)

State the market clearing conditions for Good 1 and Good 2.

** Part b (5 marks)

Let the equilibrium relative price be p (so that the price of Good 1 is pp and the price of good 2 is normalized to 1).

Find the demand of the two persons for Good 1 as functions of p:

xA1(p),xB1(p) Would Person B consume zero units of Good 1 because he has no endowment of Good 1?

** Part c (5 marks)

Find the equilibrium price p.

** Part d (5 marks)

Find the contract curve in terms of xA1,xA2 and show that the competitive equilibrium allocation is on/not on the contract curve. (No need to solve xA2 in terms of xA1.)