Contract curve is each consumer willing to trade

Reference no: EM13700193

Suppose Humphrey starts out with four pounds of food and seven gallons of water, while Lauren starts out with eight pounds of food and five gallons of water. Draw an Edge worth box that shows all possible allocations of these goods, and plot the endowment points. Now suppose that both Lauren and Humphrey’s preferences correspond to the utility function U(F, W) = min{F, W} (where F refers to pounds of food and W refers to gallons of water). This is a case of perfect complements. Add Humphrey and Lauren’s indifference curves to the Edge worth box. Then draw the contract curve. To which points on the contract curve is each consumer willing to trade?

Reference no: EM13700193

Questions Cloud

To calculate after-tax cash flow : To calculate after-tax cash flow, which item should be subtracted from "net income"?

A boiler is being considered for a new process plant : A boiler is being considered for a new process plant. The boiler can be fired either by natural gas, fuel oil, or coal. A decision must be made on which fuel to use. An analysis of the costs shows that the installed cost, with all controls, would be ..

Stevenson company is divided into two operating divisions : Stevenson Company is divided into two operating divisions: Battery and Small Motors. The company allocates power and general factory costs to each operating division using the direct method. Power costs are allocated on the basis of the number ..

What do we tell the customer : Is it fair to miscommunicate to the customer in this way? Are we being accurate, unambiguous, and clear? What’s the harm if the customer opens all the accounts? Should I have gone over to my coworker’s desk while he was with the customer and made sur..

Contract curve is each consumer willing to trade : Suppose Humphrey starts out with four pounds of food and seven gallons of water, while Lauren starts out with eight pounds of food and five gallons of water. Draw an Edge worth box that shows all possible allocations of these goods, and plot the endo..

Should palmer consider any goodwill impairment : At the end of 2015, Palmer determines that the net assets of Ruth, now a division of his company, are 600,000. Palmer also determines that the fair value of Ruth division is 500,000. Should Palmer consider any goodwill impairment? If yes, what's t..

Discuss and illustrate the economic justification : Discuss and illustrate the economic justification for establishing a warehouse and why could a warehouse be described as a "necessary evil"?

Why are chinese companies investing in africa : Why are Chinese companies investing in Africa?

Commentary response : Some experts are concerned that if American white-collar workers increase their compensation by demanding and receiving overtime pay, then offshore labor will gain an even larger cost advantage, hurting U.S. companies. Do you agree or disagree?

User Account

All Pages