Question: Consumer A has a utility function u(x,y) = xA + yA and an endowment of (x,y) = (25,5). Consumer B has a utility function u(x,y)
Consumer A has a utility function u(x,y) = xA + yA and an endowment of (x,y) = (25,5). Consumer B has a utility function u(x,y) = min{xB,yB} and an endowment (x,y) = (25,45). a. Carefully sketch the Edgeworth Box and indicate where the endowment is. b. What is As utility and Bs utility if they each simply consumer their endowments? c. Next, add the indifference curve for A and B, through their endowments in your Edgeworth Box. d. Find a Pareto Efficient allocation where A receives the same utility as she gets from her endowment.
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
