Question
1.Consider a simple economy where there are only two goods, apple (X) and banana (Y), and two consumers, A and B. The initial endowment for
1.Consider a simple economy where there are only two goods, apple (X) and banana (Y), and two consumers, A and B. The initial endowment for both is A has 50 apples and 120 bananas; B has 150 apples and 180 bananas. The both have preferences can be described the utility function U(X,Y)=XY.
a.Draw an Edgeworth box for this economy. Find the initial allocation. Is allocation F efficient, why?
b.Find all the Pareto superior allocations.
c.Draw the contract curve.
d.Prove the allocation where both equally share everything must be on the contract curve.
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