Question: Please show the working. (100 marks) Consider a simple 2-person economy with Alice and Bob. Alice's utility function is u(x,y) = xay, where x(y) is
Please show the working.

(100 marks) Consider a simple 2-person economy with Alice and Bob. Alice's utility function is u(x,y) = xay, where x(y) is the quantity Alice consumes of good X(Y), and parameters a and B are both positive numbers. Bob's utility function is uB (x,y) = xBy", where x(y) is the quantity Bob consumes of good X(Y). It is assumed that a + B = 1. To produce each of goods X and Y, one type of resources (denoted as R) is required and the production functions of X and Y are the same, described by x= f(Rx) = max{0, Rx - 0.1} and y = f(RY) = max(0, Ry - 0.1}, where x(y) is the quantity produced of consumption goods X(Y) when Ry(Ry) units of the resources are used to produce the consumption good. The endowment of R is one unit for the whole economy. Find all the top-level Pareto optimal solutions (XA, YA, XB, VB)
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