An economy described in an edgeworth box consists of 2 goods, namely X and Y and two consumers, namely A and B. Initially A has goods X and Y equal to 12 and 2 respectively, with the utility function UA (XA, YA) = XAYA . Meanwhile, B initially has goods X and Y equal to 8 and 18, respectively, with the utility function UB (XB, YB) = XBYB. It is known that the price of item X is IDR 50,000 and the price of item Y is IDR 50,000. a. Draw the economy above, in an edgeworth box representing the endowment positions of individuals A and B complete with their respective utility curves. Don't forget to include all relevant symbols and numbers on the vertical and horizontal axes. b. Is initial ownership an efficient allocation? By evaluating the endowment and MRS of individuals A and B, will there be an exchange? c. Determine the competitive balance allocation! (hint: considering the ratio of the price of goods X and Y)
An economy described in an edgeworth box consists of 2 goods, namely X and Y and two consumers, namely A and B. Initially A has goods X and Y equal to 12 and 2 respectively, with the utility function UA (XA, YA) = XAYA . Meanwhile, B initially has goods X and Y equal to 8 and 18, respectively, with the utility function UB (XB, YB) = XBYB. It is known that the
a. Draw the economy above, in an edgeworth box representing the endowment positions of individuals A and B complete with their respective utility
b. Is initial ownership an efficient allocation? By evaluating the endowment and MRS of individuals A and B, will there be an exchange?
c. Determine the competitive balance allocation! (hint: considering the ratio of the price of goods X and Y)
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