Suppose there are two consumers, A and B. The utility functions of each consumer are given by: UA(X,Y) = 2X + Y UB(X,Y) = Min(X,Y) The initial endowments are: A: X = 5; Y = 3 B: X = 2; Y = 2 a. Illustrate the initial endowments in an Edgeworth Box. Be sure to label the Edgeworth Box carefully and accurately, and ma
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Suppose there are two consumers, A and B. The utility functions of each consumer are given by: UA(X,Y) = 2X + Y UB(X,Y) = Min(X,Y) The initial endowments are: A: X = 5; Y = 3 B: X = 2; Y = 2
a. Illustrate the initial endowments in an Edgeworth Box. Be sure to label the Edgeworth Box carefully and accurately, and make sure the dimensions of the box are correct. Also, draw each consumer’s indifference curve that runs through the initial endowments. Is this initial endowment Pareto Efficient?
b. Now suppose Consumer A gets all of both goods. Is this
c. Now suppose Consumer B gets all of both goods. Is this allocation Pareto Efficient? (You do not need to draw a new graph or illustrate this on the existing graph. Simply answer “yes” or “no.”)
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