Consider the following pure exchange economy with different consumer pref- erences and endowments (e.g., @A= (w, w)), and answer the following ques- tion: (a) Draw the Edgeworth box and the endowment point. (b) Find the contract curve yA = f(xA), and plot it on the graph. (c) Find the Pareto optimal allocation and price ratio for the corresponding competitive equilibrium.
Consider the following pure exchange economy with different consumer pref- erences and endowments (e.g., @A= (w, w)), and answer the following ques- tion: (a) Draw the Edgeworth box and the endowment point. (b) Find the contract curve yA = f(xA), and plot it on the graph. (c) Find the Pareto optimal allocation and price ratio for the corresponding competitive equilibrium.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Please help with #3

Transcribed Image Text:Consider the following pure exchange economy with different consumer pref-
erences and endowments (e.g., @A = (@,w)), and answer the following ques-
tion:
(a) Draw the Edgeworth box and the endowment point.
(b) Find the contract curve y = f(xA), and plot it on the graph.
(c) Find the Pareto optimal allocation and price ratio for the corresponding
competitive equilibrium.
(d) Is the Pareto optimal allocation a fair allocation? Why?
Question 1
0.5 0.5
UA=x0.5 0.5, UB=x5y5, w = (30,20), B = (10,20).
XB ув
Question 2
0.2 0.8
UA=XA YA, UB XB YB
Question 3
0.4 0.6
= x4y6, w = (60,25), B = (40,25).
2/3
UA=XAYA' =xy, w^= (1,2).
wª = (1,2), w³ = (2,1).
Expert Solution

This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 28 images

Follow-up Questions
Read through expert solutions to related follow-up questions below.
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you


Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON

Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON


Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON

Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON

Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning

Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning

Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education