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Zaley and Iris have Legos andcrayons. Zaley has 5 Legos and 5 crayons, Iris has 2 Legos and 8 crayons. Zaley's utility function for Legos andcrayons is
uz(lz, cz) = lz · cz
where lz and cz represent quantities of Legos and crayons.Iris' utility function is
ui(li, ci) = li
in other words, Iris gets utility only from Legos and not fromcrayons.
(a) Draw the Edgeworth box for the economy consisting of Zaley andIris and their toys. Indicate the dimensions of the box, identify the initial endowment, and draw the two girls' indifference curves through the initialendowment.
(b) Consider the allocation (lz, cz) = (4, 9), (li, ci) = (3,4).
i. Is it feasible?
ii. Is it Pareto superior to the initial endowment?
iii. Is it Pareto efficient?
(c) In a competitive equilibrium of this economy, which will be higher, the price of Legos or the price of crayons?

Econometrics, Economics

  • Category:- Econometrics
  • Reference No.:- M9824099

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