Tia and Lia consume bread (R) and clothes (B) with the following utility functions: Tia : UT = 30 R0.25 B0.75 Lia : UL = 50 R0.5 B0.5 It is known that the price of bread (Pbread) is Rp. 100,000 while the price of clothes (Pclothes) is Rp. 300,000 If Tia currently consumes 5 pieces of bread and 10 clothes, while Lia consumes 12 pieces of bread and 18 clothes, specify: a. Have Tia and Lia reached an efficient allocation level? Use calculations and the Edgeworth Box to help your explanation. b. If it turns out that the level of consumption is not efficient, what is the consumption of each to reach the Paretto Optimum? Use calculations and the Edgeworth Box to help your explanation.
Tia and Lia consume bread (R) and clothes (B) with the following utility functions:
Tia : UT = 30 R0.25 B0.75
Lia : UL = 50 R0.5 B0.5
It is known that the
If Tia currently consumes 5 pieces of bread and 10 clothes, while Lia consumes 12 pieces of bread and 18 clothes, specify:
a. Have Tia and Lia reached an efficient allocation level? Use calculations and the Edgeworth Box to help your explanation.
b. If it turns out that the level of consumption is not efficient, what is the consumption of each to reach the Paretto Optimum? Use calculations and the Edgeworth Box to help your explanation.
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