5. In each of the following scenarios try to demonstrate the efficient allocation(s). a. Jane has 3 litres of soft drinks and 9 cakes. Bob has 8 litres of soft drinks and 4 cakes. At these endowments Jane's MRSsc is 4 and Bob's MRSsc is 2. With soft drinks on the horizontal axes and assuming usual convex U curves, draw an Edgeworth box diagram to show whether this allocation is efficient. If yes, explain why and if not, explain why not and what exchanges will make both parties better off. b. Jennifer and Drew are consuming orange juice and coffee with Jennifer's MRSoc = 1 and Drew's MRSoc= 3. If the price of orange juice Po= $2 and price of coffee Pc $3, explain which market is in excess demand? What will happen to these prices in a competitive, free market? With orange juice on the norizontal axes and assuming usual convex U curves, draw an Edgeworth box diagram to demonstrate.

5. In each of the following scenarios try to demonstrate the efficient allocation(s). a. Jane has 3 litres of soft drinks and 9 cakes. Bob has 8 litres of soft drinks and 4 cakes. At these endowments Jane's MRSsc is 4 and Bob's MRSsc is 2. With soft drinks on the horizontal axes and assuming usual convex U curves, draw an Edgeworth box diagram to show whether this allocation is efficient. If yes, explain why and if not, explain why not and what exchanges will make both parties better off. b. Jennifer and Drew are consuming orange juice and coffee with Jennifer's MRSoc = 1 and Drew's MRSoc= 3. If the price of orange juice Po= $2 and price of coffee Pc $3, explain which market is in excess demand? What will happen to these prices in a competitive, free market? With orange juice on the norizontal axes and assuming usual convex U curves, draw an Edgeworth box diagram to demonstrate.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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