Consider an economy with two consumers whose preferences are represented by utility functions U = min{21,...
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Consider an economy with two consumers whose preferences are represented by utility functions U₁ = min{21, 31} and U₂ = 2x2 + y2 and the aggregate endowment of 4 units of r and 3 units of y. (a) (3) Find a Pareto efficient allocation, state what each consumer consumes in that allocation, and depict the outcome in an Edgeworth box. Label the allocation as a point and draw both consumer's indifference curves at that point. Hint: You can't find MRS for perfect complements, solve the problem by finding an optimality condition for consumer 1 and carefully drawing both consumers' indifference curves in an Edgeworth box. (b) (2) Is there a Pareto efficient allocation in which one consumer has all of the goods? Prove your assertion. Consider an economy with two consumers whose preferences are represented by utility functions U₁ = min{21, 31} and U₂ = 2x2 + y2 and the aggregate endowment of 4 units of r and 3 units of y. (a) (3) Find a Pareto efficient allocation, state what each consumer consumes in that allocation, and depict the outcome in an Edgeworth box. Label the allocation as a point and draw both consumer's indifference curves at that point. Hint: You can't find MRS for perfect complements, solve the problem by finding an optimality condition for consumer 1 and carefully drawing both consumers' indifference curves in an Edgeworth box. (b) (2) Is there a Pareto efficient allocation in which one consumer has all of the goods? Prove your assertion.
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Answer good 4 Yes V MinX49 3 a Pareto efficiency will happen at all point is satisfied X X4 a... View the full answer
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