In: Economics
In a small exchange economy, three nations have been given red
and yellow color, each of the three nations have recieved 25 cans
of each color. The nations Cobb-Douglas utility functions are A)
U(R,Y) = R0.1Y0.9, B)
U(R,Y)=R0.2Y0.8 and C) U(R,Y) =
R0.3Y0.7. The nations trade.
Question 1) At what price relation will there be an
equilibrium?
Question 2) How much of each color will the nation consume?