Re: General Equilibrium.

Posted by NM on Jun 22, 2014; 11:36am
URL: http://discussion-forum.276.s1.nabble.com/General-Equilibrium-tp7593345p7593359.html

From the given data we can form the utility functions as:

Ub=Fb+Cb and Ue=min(2Fe, 3Ce)

Now when we derive the demand curves by taking P1=1, we get:

Bob: 10(1+P2)/P2 and Eric: 2(10+20P2)/(3+2P2)

Equating the demand equal to supply, I am getting P2= 3/2, which gives P1/P2 = 1/(3/2) = 2/3.

Someone please check, I am not sure of this though.