Suppose two consumers, Jack and Suzy, have identical utility functions defined for pencils (P) and notebooks (N), given by: U(P,N) = P*N Jack has an endowment of 4 pencils and 2 notebooks. Suzy has an endowment of 2 pencils and 4 notebooks. 1) Plot an Edgeworth box and mark the initial endowment. 2) Sketch indifference curves that go through the initial endowment. (Hint: this does not need to be exact, simply give the general shape of these indifference curves, and label if the indifference curve corresponds to Jack or Suzy.) 3) Draw and label a reasonable contract curve on the Edgeworth box (Hìnt: this does not need to be exact. Two of the pareto efficient allocations for Jack are (2 pencils, 2 notebooks) and (4 pencils, 4 notebooks).)

Suppose two consumers, Jack and Suzy, have identical utility functions defined for pencils (P) and notebooks (N), given by: U(P,N) = P*N Jack has an endowment of 4 pencils and 2 notebooks. Suzy has an endowment of 2 pencils and 4 notebooks. 1) Plot an Edgeworth box and mark the initial endowment. 2) Sketch indifference curves that go through the initial endowment. (Hint: this does not need to be exact, simply give the general shape of these indifference curves, and label if the indifference curve corresponds to Jack or Suzy.) 3) Draw and label a reasonable contract curve on the Edgeworth box (Hìnt: this does not need to be exact. Two of the pareto efficient allocations for Jack are (2 pencils, 2 notebooks) and (4 pencils, 4 notebooks).)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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