Suppose that there is a pure exchange economy described by: Two commodities: automobiles (a) and boats (b)
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Question:
- Suppose that there is a pure exchange economy described by:
- Two commodities: automobiles (a) and boats (b)
- Two people: Mel (M) and Norm (N)
- Endowment = (a(m) , b(m), a(n), b(n) = (7, 8, 1 , 14)
- Draw the Edgeworth box that represents this economy.
- Suppose the Endowment is not Pareto optimal. Using indifference curves show the region in which feasible allocations offer a Pareto improvement over the endowment.
- Show the region in which feasible allocations offer a reduction in satisfaction for both individuals.
- What allocation would be perfectly equitable and explain whether this would be a good social outcome?
Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
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