Question 3 Suppose two individuals, A and B, consume two goods (x₁, x₂). A's initial endowment is (6,4) and B's endowment is(2,12). They each have the utility function U¹(x₁,x₂) = x₁x₂, for i = A, B. i. ii. Draw a well-labelled Edgeworth box to illustrate this situation. On the graph drawn for part a) identify the contract curve and label it cc'. Determine the exact allocations at EITHER point c or point c'.

Question 3 Suppose two individuals, A and B, consume two goods (x₁, x₂). A's initial endowment is (6,4) and B's endowment is(2,12). They each have the utility function U¹(x₁,x₂) = x₁x₂, for i = A, B. i. ii. Draw a well-labelled Edgeworth box to illustrate this situation. On the graph drawn for part a) identify the contract curve and label it cc'. Determine the exact allocations at EITHER point c or point c'.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter13: General Equilibrium And Welfare

Section: Chapter Questions

Problem 13.5P

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