Question
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: s=Bs^1/3Cs^2/3 Andrew's preferences are given by: Ua=Ba^1/2Ca^1/2 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.
Find equilibrium price and equilibrium quantities.
Hi, I've found equilibrium price to be p=1.375, how do I work out the quantities? Can you please provide a detail explanation and answer. Thanks!
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