$ONTEXT
This is the GAMS code;

$OFFTEXT


PARAMETERS

 TX         Ad-valorem tax rate for X sector inputs;
 TX = 0;


POSITIVE VARIABLES
 X
 Y
 PX
 PY
 L
 K
 W
 R
 CONS;

EQUATIONS
 PRF_X   Zero profit for sector X
 PRF_Y   Zero profit for sector Y
 
 MKT_X   Supply-demand balance for commodity X
 MKT_Y   Supply-demand balance for commodity Y
 MKT_L   Supply-demand balance for primary factor L
 MKT_K   Supply-demand balance for primary factor L
 I_CONS  Income definition for CONS;


*       Zero profit inequalities
*  0.75**0.75*0.25**0.25=0.5699

PRF_X..         W**0.25*R**0.75*(1+TX)/0.5699 =G= PX;

PRF_Y..         W**0.75* R**0.25 =G= PY;

*       Market clearance inequalities

MKT_X..         X =G= PX**0.5 * PY**0.5 / PX;

MKT_Y..         Y =G= PX**0.5 * PY**0.5 / PY;



MKT_L..         1 =G=  (0.25/0.75)**0.75 * R**0.75 * W**(-0.75) * X +
                       (0.75/0.25)**0.25 * R**0.25 * W**(-0.25) * Y   ;

MKT_K..         1 =G=  (0.75/0.25)**0.25 * W**0.25 * R**(-0.25) * X +
                       (0.25/0.75)**0.75 * W**0.75 * W**(-0.75) * Y   ;

*       Income balance equations

I_CONS..        CONS =E= 1*W + 1*R + TX*1*X*W**0.25*R**0.75;


MODEL ALGEBRAIC /PRF_X.X, PRF_Y.Y, MKT_X.PX, MKT_Y.PY, MKT_L.W, 
                 MKT_K.R, I_CONS.CONS /;


*       Chose a numeraire (not necessary)

W.FX = 1;

*       Set initial values of variables:

X.L=1; Y.L=1; PX.L=1; PY.L=1; R.L=1; W.L=1;
CONS.L=2;

SOLVE ALGEBRAIC USING MCP;


*       Solve the counterfactuals:

TX = 0.5;       

SOLVE ALGEBRAIC USING MCP;