Re: General Equilibrium - May 18

Posted by duck12 on Jun 01, 2012; 9:09am
URL: http://discussion-forum.276.s1.nabble.com/General-Equilibrium-May-18-tp7565438p7577427.html

When the price ratio = 1 consumer 2's income becomes m2 = 2p1+6p2
so demand for good 2 = m2/p2 = 2p1+6p2 /p2 = 2p1/p2 + 6 = 8 when p1/p2 = 1
Also, consumer 1 - income = (10p1+2p2)
he needs to have minimum 12 in his consumption bundle (total of 1+2) , so if we give him 12 of good 1 and 0 of good 2, consumer 2 gets 8 of good 2 , isn;t that a competitive equilibrium?
(10p1+2p2) / p1 = 10 + 2 p2/p1 = 12 and both markets clear... what's wrong with my approach?