Draw a fully labelled Edgeworth box diagram for the island s economy, showing the quantity of
Question:
Draw a fully labelled Edgeworth box diagram for the islands economy, showing the quantity of vegetables on the horizontal axis and the quantity of fish on the vertical axis. Place Aidens origin at the bottom left of the diagram. On your diagram:
iIllustrate the preferences of the two consumers Aiden and Biden for vegetables and fish using indifference maps and assuming a diminishing marginal rate of substitution MRS Use at least three indifference curves for each consumer and label each curve with a number.
iiExplain the meaning of:
athe dimensions of the box
bthe indifference maps
cthe marginal rate of substitution MRS
iii.show the contract curve and explain its economic significance. Suppose Aiden starts with a high endowment of vegetables and few fish, while Biden begins with most of the fish and little vegetables. Using a copy of the box diagram in Question :
iShow the point of the initial endowment mark it with W and indicate by referring to your numbered indifference curves the utility levels that Aiden and Biden could achieve with this endowment.
iiShow and shade an area that shows all possible combinations of vegetables and fish consumption that would make both Aiden and Biden better off compared to their initial endowment.
iii.Identify the core of this twoperson economy given the initial endowment. Explain the economic significance of the core.
Cost Accounting A Managerial Emphasis
ISBN: 978-0133428704
15th edition
Authors: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan