- Access to
**800,000+**Textbook Solutions - Ask any question from
**24/7**available

Tutors **Live Video**Consultation with Tutors**50,000+**Answers by Tutors

Suppose there are two consumers A and B The utility

Suppose there are two consumers, A and B. The utility functions of each consumer are given by:

UA(X,Y) = X *Y

UB(X,Y) = X + 2Y

The initial endowments are:

A: X = 2; Y = 6

B: X = 2; Y = 2

a) Using an Edgeworth Box, graph the initial allocation and draw the indifference curve for each consumer that runs through the initial allocation. Be sure to label your graph carefully and accurately.

b) What is the marginal rate of substitution for consumer A at the initial allocation?

c) What is the marginal rate of substitution for consumer B at the initial allocation?

d) Is the initial allocation Pareto Efficient? If so, simply say “It is Pareto Efficient”. If not, propose a trade between the two consumers that would make them both better off. Be specific.

UA(X,Y) = X *Y

UB(X,Y) = X + 2Y

The initial endowments are:

A: X = 2; Y = 6

B: X = 2; Y = 2

a) Using an Edgeworth Box, graph the initial allocation and draw the indifference curve for each consumer that runs through the initial allocation. Be sure to label your graph carefully and accurately.

b) What is the marginal rate of substitution for consumer A at the initial allocation?

c) What is the marginal rate of substitution for consumer B at the initial allocation?

d) Is the initial allocation Pareto Efficient? If so, simply say “It is Pareto Efficient”. If not, propose a trade between the two consumers that would make them both better off. Be specific.

Membership
TRY NOW

- Access to
**800,000+**Textbook Solutions - Ask any question from
**24/7**available

Tutors **Live Video**Consultation with Tutors**50,000+**Answers by Tutors

Relevant Tutors available to help