Question
Amanda and Jill are flatmates. They both consume good and good . Amanda has a utility function = (10 + 15)2 and Jill has a
Amanda and Jill are flatmates. They both consume good and good . Amanda has a utility function = (10 + 15)2 and Jill has a utility function = (30 + 45)3.
Both Jill and Amanda are endowed with a certain amount of and and they are able to exchange goods if they wish.
A. Both Amanda and Jill view goods and to be perfect substitutes. How do you know this? (3 points)
B. Draw an Edgeworth Box showing an example endowment allocation. Sketch Amanda and Jill's indifference curves that go through this endowment point. (3 points)
C. What is a contract curve? Show the contract curve on the Edgeworth Box. (4 points)
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