Question
Consider an economy with two goods (x and y) and two persons,A and B, who have the following utility functions: UA(x; y) = x+2y and
Consider an economy with two goods (x and y) and two persons,A and B, who have the following utility functions: UA(x; y) = x+2y and UB(x; y) =2x + y.
Suppose that there are, in total, 6 units of x and 6 units of y available in the economy. Consider an allocation in which person A gets 2 units of x and 4 units of y and person B gets 4 units of x and 2 units of y.
Question: Identify the area that shows a Pareto efficiency improvement for this allocation. Explain your answer with the aid of an Edgworth Box.
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Macroeconomics
Authors: David Colander
8th edition
978-0078004407, 78004403, 978-0077247171, 77247175, 978-0077307110
