a. Assume an economy where there is no production (only exchange). Draw an Edgeworth Box with indifference curves that represent 2 individuals (A and B) whose utility are represented by the following functions: Individual A: UA = min (ax + bx2) Individual B: U = ax + bx b. Explain (you don't have to draw yet) how do you find the contract curve in the Edgeworth Box that you have drawn in part (a). c. Draw the contract curve in the Edgeworth Box that you have drawn in part (a).

a. Assume an economy where there is no production (only exchange). Draw an Edgeworth Box with indifference curves that represent 2 individuals (A and B) whose utility are represented by the following functions: Individual A: UA = min (ax + bx2) Individual B: U = ax + bx b. Explain (you don't have to draw yet) how do you find the contract curve in the Edgeworth Box that you have drawn in part (a). c. Draw the contract curve in the Edgeworth Box that you have drawn in part (a).

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.11P

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Question

a. Assume an economy where there is no production (only exchange). Draw an
Edgeworth Box with indifference curves that represent 2 individuals (A and B)
whose utility are represented by the following functions:
Individual A: UA = min (ax + bx2)
Individual B: UB = ax + bx
b. Explain (you don't have to draw yet) how do you find the contract curve in the
Edgeworth Box that you have drawn in part (a).
c. Draw the contract curve in the Edgeworth Box that you have drawn in part (a).

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Step 3: Explaining How to Find the Contract Curve

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Step 4: Drawing the Contract Curve in the Edgeworth Box

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