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(18 points) Again there are two goods, r and y, with prices pa > 0 and py = 1, respectively. Alice's daily utility function is
(18 points) Again there are two goods, r and y, with prices pa > 0 and py = 1, respectively. Alice's daily utility function is uA(x, y) = 20.25 x yo. , and her daily budget is 100. When Alice did her shopping today, pr was 5 and she purchased her optimal (x, y)-bundle, but has not consumed any of it yet. She then unexpectedly meets Jiwon, who already possess the bundle (x, y) = (er, e;) = (95, 25). Jiwon's utility function is uj(x,y) = x x y. Jiwon proposes the following trade: Jiwon to give Alice 10 units of x; Alice to give Jiwon 10 units of y. (a) Would the proposed trade improve Alice's utility? (b) Demonstrate that the proposed trade does NOT lead to a Pareto efficient allocation. (c) Jiwon's proposed trade is of the form n-units for a in exchange for n-units of y, for n = 10. Find the n for which the trade would result in a Pareto efficient allocation
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