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Mary [consumer 1] and Luc:,-r (consumer 2) are the only two consumers in the economy. Each of them consumes only two goods1 sh (good I}
Mary [consumer 1] and Luc:,-r (consumer 2) are the only two consumers in the economy. Each of them consumes only two goods1 sh (good I} and chips [good y], which the},r also own. llEonsumer 1's utility function is given by U1 {1-, a} = was\" She has 25 units of I and 5 units of y. ISonsumer 2's utility mction is given by Wny} = ins +lny. She has 6 units of :1: and EU units of 11;. Let in be the price of :1: and normalise the price of y to 1. {a} (4 marks} Draw the Edgeworth Box of this economy, marl-:ing 12'learljll.-r the endcw ment point. For each consumer, sketch the Indifference curiae passing through the endowment point. {b} (2 marks} Calculate the marginal rate of substitution for each consumer at the endowment point. {1:} {2 marks] 1Who is going to sell .'I.' and bu}.-r y? \"thy? [d] (5 marks] Find the demand of consumer 1 for crdenote it as cland the demand of consumer 1 for ydenote it as yl. {e} (5 marks] Find the demand of consumer 2 for mdenotae it as IgEJl-Cl the demand of consumer 2 for ydenote it as ya. {f} (4 marks] Find the equilibrium price of good 1'. {g} (4 marks] Find the equilibrium consumption bundle of each consumer. {h} (4 marl-cs] Marl: your answer to part [g] in the Edgeworth Box you have drawn for part [a]. Draw the budget line under the equilibrium price. For each consumer, draw the indifference curve passing through the equilibrium consumption bundle
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