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Shania and Linda consume food (F) and book (B) with the following utility functions: = Shania's utility function: Us = 30 F0.25 B0.75 Linda's utility
Shania and Linda consume food (F) and book (B) with the following utility functions: = Shania's utility function: Us = 30 F0.25 B0.75 Linda's utility function : U_ = 50 F0.5 30.5 Suppose the price of food (PF) is Rp 100,000 and the price of book (PB) is Rp 300,000. If currently Shania consumes 5 unit of foods and 10 unit of books, while Linda consumes 12 unit of foods and 18 unit of books, answer the followings: a. Have Shania and Linda reached an efficient allocation condition? Use calculation and Edgeworth Box to prove your answer. b. If it turns out that the level of consumption is not efficient, how many foods and books should they each consume to reach the Pareto Optimum? Use calculations and Edgeworth Box to prove your answer. C. If you were the Government, what would you do to increase the society's welfare? (hint: use the Utility Possibility Frontier and Social Welfare diagram in your explanation). Shania and Linda consume food (F) and book (B) with the following utility functions: = Shania's utility function: Us = 30 F0.25 B0.75 Linda's utility function : U_ = 50 F0.5 30.5 Suppose the price of food (PF) is Rp 100,000 and the price of book (PB) is Rp 300,000. If currently Shania consumes 5 unit of foods and 10 unit of books, while Linda consumes 12 unit of foods and 18 unit of books, answer the followings: a. Have Shania and Linda reached an efficient allocation condition? Use calculation and Edgeworth Box to prove your answer. b. If it turns out that the level of consumption is not efficient, how many foods and books should they each consume to reach the Pareto Optimum? Use calculations and Edgeworth Box to prove your answer. C. If you were the Government, what would you do to increase the society's welfare? (hint: use the Utility Possibility Frontier and Social Welfare diagram in your explanation)
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