Suppose a world with two goods: the good x and a currency m. There are 1,000 identical consumers in this economy, each with an income of y and having all

following preferences: Ui (xi, mi) = 1, 000xi - 5xi²+ m_i

Suppose that the price of good x is p and that the price of cash m is 1.

a) What is the Walrasian demand, xi (p, y), of a consumer i? Suppose a

interior solution (i.e. that given by first order conditions).

b) What is the market demand, Xd

(p) for good x?