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Sarah and Andrew are two traders in a pure exchange economic with two goods, Bikes (B) and Computers (C). Sarah's preferences are described by the
Sarah and Andrew are two traders in a pure exchange economic with two goods, Bikes (B) and Computers (C). Sarah's preferences are described by the Cobb-Douglas Utility function: Us = B's 3 C2/ 3 'S Andrew's preferences are given by: UA = BUCA Assume the price of Bikes is 1 and the price of computers is p. The initial endowments are BA = 10, Bs = 20, CA = 20 and Cs = 10. What is the equilibrium price of computers relative to bikes (p)? Answer: 1.375 V
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