Asked by Maegan Cantu on May 01, 2024
Verified
Will likes apples and hates bananas.Wanda likes both apples and bananas.Both of them have convex preferences.Will's initial endowment is 10 apples and 5 bananas.Wanda's initial endowment is 5 bananas and 10 apples.
a.Draw an Edgeworth box with apples on the horizontal axis.Label the initial endowment point W.
b.Show two indifference curves for each person.
c.Show where on your diagram the Pareto optimal allocations are.
Convex Preferences
Preferences that express a consumer's desire for diversified bundles of goods over extreme bundles, depicted graphically as convex indifference curves.
Edgeworth Box
A diagram representing various distributions of resources, used to examine issues of allocation efficiency in economics.
Indifference Curves
Graphical representations showing combinations of two goods that give a consumer equal levels of satisfaction, indicating preferences.
- Understand the concept of utility functions and how they represent preferences in economics.
- Acquire the skills to build and analyze Edgeworth boxes in different economic contexts.
- Recognize Pareto optimal distributions and comprehend the circumstances that lead to their emergence.
Verified Answer
EH
Elvis HarizajMay 08, 2024
Final Answer :
c.The Pareto optimal allocations include all of the allocations where Will has no bananas.If stuff for Will is measured from the lower left corner, then these allocations are all along the bottom of the box.
Learning Objectives
- Understand the concept of utility functions and how they represent preferences in economics.
- Acquire the skills to build and analyze Edgeworth boxes in different economic contexts.
- Recognize Pareto optimal distributions and comprehend the circumstances that lead to their emergence.