Question

Suppose capital and labor is perfect substitutes in production for clothing: 2 units of capital or 2 units of labor produce 1 unit of clothing. Suppose capital and labor is perfect complements in production for food: 1 unit of capital and 1 unit of labor produce 1 unit of food. Suppose the economy has an endowment of 100 units of capital and 200 units of labor. Describe the set of efficient allocations of the factors to the two sectors (determine the contract curve in an Edgeworth production box).



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  • CreatedDecember 12, 2014
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