Solution

ID: past-exam-of-the-mathematics-course-of-the-university-of-cambridge/2004/iii/paper-36/4/c/solution

When both consumers have the same quasilinear utility on , the same strictly concave one-variable maximization gives , independently of their wealth. If their first-good endowments are , then
Thus the joint regular-value condition always holds. With positive total first-good endowment, the equilibrium is
Both first-good markets and second-good markets clear: second-good demands sum to . If a nonstandard endowment choice has , there is no positive-price zero, so the regular value condition is vacuous. In the usual positive-endowment case every parameter has the displayed unique regular exchange economy.

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