please answer part D and E here only (1) Consider a small exchange economy with two consumers, A and B, and two commodities, 2₁ and₂. Consumer A's initial endowment is 3 units of ₁ and 2 unit of 2. Consumer B's initialendowment has 5 units of 2₁ and 4 units of r2. Consumer A's utility function is given byU(x₁,₁)= x₁x₁.Consumer B's utility function is given byU(x,x) = 2x² + x2.Note that r4 and 2 are the amounts of the two goods for Consumer A, and rf and 2 areamounts of the two goods for Consumer B.(a) Draw an Edgeworth box, showing the initial allocation. Label it as E. Measure Consumer A'sconsumption from the lower left and Consumer B's from the upper right. Also measure thenumber of r₁ on the horizontal axis and the number of r2 on the vertical axis.(b) Draw Consumer A's indifference curve (ICA) going through E.(c) Draw Consumer B's indifference curve (ICB) going through E.(d) Is the initial endowment (E) Pareto-optimal? Explain your answer.(e) Draw the contract curve in the same Edgeworth box.

Given: The utility function of A: U(x1A,x2A)=x1Ax2A The utility function of B: U(x1B,x2B)=2x1B+x2B

Consider a small exchange economy with two consumers, A and B, and two commodities, 2₁ and 12. Consumer A's initial endowment is 3 units of 2₁ and 2 unit of 72. Consumer B's initial endowment has 5 units of 2₁ and 4 units of 2₂. Consumer A's utility function is given by U(₁₁,1)= 1₁1₁. Consumer B's utility function is given by U(r², 1²) = 21² + 12.

Consider a small exchange economy with two consumers, A and B, and two commodities, 2₁ and 12. Consumer A's initial endowment is 3 units of 2₁ and 2 unit of 72. Consumer B's initial endowment has 5 units of 2₁ and 4 units of 2₂. Consumer A's utility function is given by U(₁₁,1)= 1₁1₁. Consumer B's utility function is given by U(r², 1²) = 21² + 12.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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