Question
Consider an exchange economy with two goods (mango and honey) and two consumers (A and B). There are 10 units available of each of the
Consider an exchange economy with two goods (mango and honey) and two consumers (A and B). There are 10 units available of each of the two goods. Consumer A is endowed with 6 units of mango and 4 units of honey. Consumer B is endowed with 4 units of mango and 6 units of honey. Let M denote units of mango and H denote units of honey. Consumer A has the following utility function: U=MH
And consumer B has the following utility function U=M+H
a. Derive each consumers demand curve?
b. Find the equilibrium prices and quantities?
c. Draw the Edgeworth box of equilibrium units.
d. Derive the contract curve.
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