Consider intemporal exchange economy with two consumers

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Consider an intemporal exchange economy with two consumers, A and B, and one perishable consumption good. Person A is endowed with 4 units of the good in period 1 and 0 units in period 2. Person B is endowed with 0 units in period 1 and 10 units in period 2. They have identical preferences for consumption in periods 1 and 2, which are represented by the utility function u(c 1 ; c2 ) = ln(c 1 ) + ln(c 2 ). Find the competitive equilibrium relative price at which these agents would trade c 1 for c 2 . What is the interpretation of this in terms of the interest rate?

Reference no: EM131391840

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