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Suppose that Sheila and Bruce set up competitive markets for cookies (x) and pretzels (y). Let Px be the price of cookies and Py the
Suppose that Sheila and Bruce set up competitive markets for cookies (x) and pretzels (y). Let Px be the price of cookies and Py the price of pretzels. f) Write the two equations that define Sheila's best bundle of cookies and pretzels. Solve for her best bundle (i.e. her Marshallian Demands) g) Use her Marshallian Demands to write Sheila's net demands for cookies (x) and pretzels (y). h) Do the same for Bruce (find his Marshallian Demands and write his net demands) i) Use Sheila and Bruce's net demand for cookies (x) to find the price ratio that clears the market for cookies. j) What "law" guarantees that the pretzels market will also clear at this price ratio? k) Illustrate the General Equilibrium allocation and budget line in your Edgeworth box diagram. Include a pair of indifference curves through the GE allocation
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