Question

There are two goods 𝑋 and 𝑌 and there are two consumers 𝐴 and 𝐵 in a pure exchange economy. 𝐴 and 𝐵 have Cobb-Douglas utility functions of the form $𝑈_𝐴 = 2𝑋^{0.4} 𝑌^{0.6}$ and $𝑈_𝐵 = 𝑋^{0.3}𝑌^{0.7}$, respectively. Initially, 𝐴 is endowed with 50 units of good 𝑋 and 20 units of good 𝑌. Similarly, 𝐵 is endowed with 50 units of good 𝑋 and 20 units of good 𝑌. If the unit price of good 𝑌 is normalised to 1, then the equilibrium unit price for good 𝑋 is _____. (rounded off to two decimal places).

Answer 1

Correct Answer: 0.21

The correct answer is :0.21