2. Diana and Jennie are stranded on a desert island. Each has in his possession some slicesof ham (H) and bread (B). Diana is a choosy eater and will eat ham and bread only in thefixed proportions of 2 slices of bread to 1 slice of ham. Her utility function is given byUp = min(H, B/2). Jennie is more flexible in his dietary tastes and has a utility functiongiven by U, = 4H + 3B. Total endowments are 100 slices of ham and 200 slices of bread.a. Draw the Edgeworth box diagram that represents the possibilities for exchange inthis situation. What is the only exchange ratio that can prevail in any equilibrium?b. Suppose Diana initially had 40H and 80B. What would the equilibrium positionbe?c. Suppose Diana (much the stronger of the two) decides not to play by the rules ofthe game. Then what could the final equilibrium position be?

An Edgeworth box is a graphical depiction of a market with just two goods, X and Y, and two…

2. Diana and Jennie are stranded on a desert island. Each has in his possession some slices of ham (H) and bread (B). Diana a choosy eater and will eat ham and bread only in the fixed proportions of 2 slices of bread to 1 slice of ham. Her utility function is given by Up = min(H, B/2). Jennie is more flexible in his dietary tastes and has a utility function given by U, = 4H + 3B. Total endowments are 100 slices of ham and 200 slices of bread. %3D a. Draw the Edgeworth box diagram that represents the possibilities for exchange in this situation. What is the only exchange ratio that can prevail in any equilibrium?

2. Diana and Jennie are stranded on a desert island. Each has in his possession some slices of ham (H) and bread (B). Diana a choosy eater and will eat ham and bread only in the fixed proportions of 2 slices of bread to 1 slice of ham. Her utility function is given by Up = min(H, B/2). Jennie is more flexible in his dietary tastes and has a utility function given by U, = 4H + 3B. Total endowments are 100 slices of ham and 200 slices of bread. %3D a. Draw the Edgeworth box diagram that represents the possibilities for exchange in this situation. What is the only exchange ratio that can prevail in any equilibrium?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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