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Consider a household that has two members. Each member has the same individual capacity curve, given below. Note that the capacity curve gives the relation
Consider a household that has two members. Each member has the same individual capacity curve, given below. Note that the capacity curve gives the relation between income today and income tomorrow. The identical individual capacity curve, together with the 45 degree line, is shown in the following diagram. Suppose OA = AB and OC = CE Suppose the household's income today is OD. The household divides today's income between its two members with the objective of maximizing tomorrow's household income (which is the sum of tomorrow's incomes of the two members). Showing all steps of your work, determine whether dividing today's income equally or unequally is best for the household
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