There are only two consumers bill and ted and two goods, Ask an Expert

Economics

There are only two consumers: Bill and Ted, and two goods: apples and bananas. Bill and Ted like apples and oranges. Bill is always willing to subsitute 1 apple for 3 bananas. So Bill's utility function is UB = 3A + B. Ted is always willing to subsitute 1 apple for 2 bananas. So Bill's utility function is UT = 2A + B. Assume that there are 12 apples and 24 bananas to split between Bill and Ted.

a) Construct an appopriately sized Edgeworth box for them.

b) Draw indifference curves for both Bill and Ted in your Edgeworth box in Part (a). Draw Bill's indifference curve with thick lines, and Ted's with thin lines (or you can use lines with different colors to show Bill's and Ted's indifference curves)

c) Assume that initially Bill has 3 apples and 10 bananas. How many apples and bananas does Ted have?

d) Is the initial allocation in part (c) pareto efficient? Explain

e) Find the constraint curve.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91867063

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