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Person A and B both have Cobb-Douglas preferences, uA = (x1A)2/5 · (x2A)3/5and uB = x1B...

Person A and B both have Cobb-Douglas preferences, uA = (x1A)2/5 · (x2A)3/5and uB = x1B · x2B . Their endowments are wA = (0, 2) and wB = (4, 0). Find their demand functions and use market clearing to derive equilibrium price for good two, p2 (set p1=1, and enter your answer as a simplified decimal).

Solve for the contract curve for the setting described in question 1.). Please write out its equation in the space below.

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