# Eet 200: Microeconomic Theory Ii. Cat One Question Paper

Exam Name: Eet 200: Microeconomic Theory Ii. Cat One

Category: Kenyatta University question papers

Exam Year:2016

EET 200: MICROECONOMIC THEORY II. CAT ONE

1. Consider a two-person economy consisting of Ann and Bob.

Both of them only consume x and y.

Ann’s utility over these two goods is FORMULA and Bob’s utility FORMULA.

Initially Ann is endowed with 9 units of x and zero units of y; Bob is endowed with 6 units of y and zero units of x.

i. Write Ann’s marginal rate of substitution in terms of xA and yA and Bob’s marginal rate of substitution in terms of xB and yB. ( 2 marks)

ii. Derive the equation for the contract curve. ( 5 marks)

iii. Find the general equilibrium allocation of x and y among Ann and Bob of the above economy. ( 8 marks)

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