Rahim and Karim are two brothers. Rahim got 4 ice creams and 6 chocolates and Karim received 6 ice creams and 4 chocolates from heaven (the economy is assumed with no production and the amounts of goods they received as the initial endowments). The two brothers have the same Cobb-Doughlas preference structure. Draw the Edgeworth box and level the initial endowments. What is Pareto improvement? Does Pareto improvement possible here? If yes, show the Pareto improvement area in the Edgeworth box.

Rahim and Karim are two brothers. Rahim got 4 ice creams and 6 chocolates and Karim received 6 ice creams and 4 chocolates from heaven (the economy is assumed with no production and the amounts of goods they received as the initial endowments). The two brothers have the same Cobb-Doughlas preference structure. Draw the Edgeworth box and level the initial endowments. What is Pareto improvement? Does Pareto improvement possible here? If yes, show the Pareto improvement area in the Edgeworth box.

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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