Microeconmics: logarithmic utility functions and demand in a two persons two goods market!?
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Given: Two Persons two goods with; 1. Utility Functions: For Person A: U(A) = ln (x1) + ln (x2) For Person B: U(B) = ln (x1) + ln (x2) 2. Budget restriction: Good one: (2, 2) Good two: (2, 0) Wanted: - Do you think that the Contract line between the two persons in an Edgeworth-box would be diagonal from the origins? - How do you think the demand Functions for the two Persons would look like? - Would the price in equilibrium be 1? Thanks alot!!
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Answer:
Yes, it would be diagonal. left sloping downward to the right. no, the equilibrium would not be 1
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