Question 2. Suppose there are two consumers, A and B, and two goods, X and Y. The consumers have the following initial endowments and utility functions Consumer A: ● X = 5
Question 2. Suppose there are two consumers, A and B, and two goods, X and Y. The consumers have the following initial endowments and utility functions Consumer A: ● X = 5
Chapter6: Demand Relationships Among Goods
Section: Chapter Questions
Problem 6.9P
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Transcribed Image Text:Question 2.
consumers have the following initial endowments and utility functions
Consumer A:
Consumer B:
Suppose there are two consumers, A and B, and two goods, X and Y. The
X = 5
Y = 2
UA (X,Y)= MIN (2X,Y)
●
X = 3
Y = 6
UB (X,Y)= 3X + Y
Suppose the Price of X is Px = $2, and the Price of Y is Py = $1.
a) Suppose each consumer sells their initial endowment and buys back their optimal bundle. Using an
Edgeworth Box, illustrate
The Budget Constraint
The Initial Endowment (W)
A's Optimal Bundle (A)
B's Optimal Bundle (B)
Label the initial endowment W, label A's optimal bundle A, and label B's optimal bundle B. Make sure
your graph is clearly and accurately labeled.
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