Two individuals, Fred and Helen, are in an economy with no production, and each have the utility

function U= 10XY. Prices of both Xand Y are set at $1. Initial endowments for Fred are 10 units of Xand 6 units of Y. Helen has 8 units of Xand 12 units of Y.

1. Construct the Edgeworth box diagram for this economy.
2. Show that this initial endowment is not Pareto efficient.
3. Find the general equilibrium prices and allocation.

Show that the G.E. allocation isPareto efficient.