Econ Question 1:

2 2. (10 points) Consider a pure exchange economy with two consumers and two goods. Total endowments of the two goods are given by X = 16 and = 8. Consumer A regards goods X and Y as perfect substitutes with MRS = 1/2. Consumer B's utility function is given by ug(Xg, Yp) = minimum{2Xg, 4Y5}. (a) Find the contract curve for this economy. (b) Suppose the initial endowments are given as the following: (X4, y) = (16,0), (Xg, g) = (0,8). Find the set of Pareto efficient allocations that Pareto dominate the endowment point