Consider a two-person (1 and 2) two good (X and Y) exchange economy. The marginal rate...

Consider a two-person (1 and 2) two good (X and Y) exchange economy. The marginal rate of substitution (of good X in terms of good Y) utility function of person i

Person 1: MRS₁ = 2y₁ /x₁

Person 2: MRS₂ = y₂ /(5x₂)

where x_i and y_i denote respectively person i's the consumption amount of good X and good Y, i=1, 2.

Their endowments are given in the following table

_{Endowment of X Endowment of
Y}

_{Person 1
10
            26}

_{Person
2
28
            26}

What is the equilibrium relative price of good X assuming "perfect competition"?

Expert Solution

Rahul Sunny answered 1 year ago

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