Answered step by step
Verified Expert Solution
Question
1 Approved Answer
3. (12 points) Suppose there are two consumers, A and B. The utility functions of each consumer are given by: UA(X,Y) = xl/2*Y1/2 UB(X,Y) =
3. (12 points) Suppose there are two consumers, A and B. The utility functions of each consumer are given by: UA(X,Y) = xl/2*Y1/2 UB(X,Y) = X + 4Y The initial endowments are: A:X=4;Y=4 B:X=12;Y=4 a) (6 points) Using an Edgeworth Box, graph the initial allocation (label it \"W\") and draw the indifference curve for each consumer that runs through the initial allocation. Be sure to label your graph carefully and accurately. b) (2 points) What is the marginal rate of substitution for consumer A at the initial allocation? c) (2 points) What is the marginal rate of substitution for consumer B at the initial allocation? d) (2 points) Is the initial allocation Pareto Efficient
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started