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There are only two people in an economy, Sans and Papyrus. Sans' utility is given by the function Us = VCs, where C's is Sans'
There are only two people in an economy, Sans and Papyrus. Sans' utility is given by the function Us = VCs, where C's is Sans' consumption. Papyrus' utility function is given by Up = ,VCp. where Cp is Papyrus' consumption. Sans has an income of $15,000, and Papyrus has an income of $25,000. Both Sans and Papyrus use all their income for consumption. (a) (3 points) Suppose that the social welfare function is SWF = Us + Up. Draw the social indifference curves. What is the welfare maximizing income distribution? (b) (3 points) Suppose that the social welfare function is SWF = min {2Us, Up}. Draw the social indifference curves. What is the welfare maximizing income distribution
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