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Assume that there are two types of consumers. In particular, consumers of type 1 has utility function u(x, y) = x0.5 y0.5, whereas consumer of type 2 has u(x, y) = x0.3 y0.7. Both of them have income given by I>0, and the prices denoted are by PX and PY, as usual.
a) Find the Marshallian demands of x for both types of consumers.
b) In what follows, suppose that there are 50 consumers of type 1 and 100 of type 2. Find the market demand of x. Does the price of y affect this demand?
c) Now suppose that I= 2 and that the market supply of X is given by QS = 55 + 55PX. Compute the short-run equilibrium price and its corresponding quantity.
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