1. General Equilibrium: a. Suppose that Eliza and Alexander are currently at point A. How many servings of tea and scones does each person have? (Note: Alexander's indifference curve is pink while Eliza's indifference curve is black). b. Suppose that Eliza leaves the room and that Alexander takes 4 cups of tea from her and leaves her 2 of his scones. Illustrate this reallocation in the Edgeworth Box diagram (label this point B). Is this a Pareto improvement? c. Show that a reallocation where Alexander takes 4 cups of tea and leaves Eliza only 1 scone is not a Pareto improvement. Label this new allocation point C. Alexander's Scones

1. General Equilibrium: a. Suppose that Eliza and Alexander are currently at point A. How many servings of tea and scones does each person have? (Note: Alexander's indifference curve is pink while Eliza's indifference curve is black). b. Suppose that Eliza leaves the room and that Alexander takes 4 cups of tea from her and leaves her 2 of his scones. Illustrate this reallocation in the Edgeworth Box diagram (label this point B). Is this a Pareto improvement? c. Show that a reallocation where Alexander takes 4 cups of tea and leaves Eliza only 1 scone is not a Pareto improvement. Label this new allocation point C. Alexander's Scones

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1. General Equilibrium:
a. Suppose that Eliza and Alexander are currently at point A. How many
servings of tea and scones does each person have? (Note: Alexander's
indifference curve is pink while Eliza's indifference curve is black).
b. Suppose that Eliza leaves the room and that Alexander takes 4 cups of tea
from her and leaves her 2 of his scones. Illustrate this reallocation in the
Edgeworth Box diagram (label this point B). Is this a Pareto improvement?
c. Show that a reallocation where Alexander takes 4 cups of tea and leaves Eliza
only 1 scone is not a Pareto improvement. Label this new allocation point C.
Alexander's Scones
Utility Alexander
A
Utility Eliza
Eliza's scones
Eliza's Tea
Alexander- s Tea

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