Contract curve with the conventional contract curve depicted

Assignment Help Business Economics

Reference no: EM131090281

Suppose that Hannah’s utility function is UH = 4C + 3T and that Jose’s utility function is UJ = 3C + 4T, where C is pounds of coffee per year and T is pounds of tea per year. Suppose there are fixed amounts of 28 pounds of coffee per year and 21 pounds of tea per year. Suppose also that the initial allocation is 15 pounds of coffee to Hannah (leaving 13 pounds to Jose) and 10 pounds of tea to Hannah (leaving 11 pounds of tea to Jose). Plot C on the horizontal axis and T on the vertical axis. a) What do the utility functions say about the marginal rate of substitution of tea for coffee for Hannah, MRSCT Hannah, and the marginal rate of substitution of tea for coffee for Jose, MRSCT Jose, respectively. b) Draw the Edgeworth Box showing indifference curves and the endowment, i.e., the initial allocation. c) Is the initial allocation of coffee and tea Pareto efficient? Indicate the Paretoimproving moves that would result. Draw the contract curve on the Edgeworth box. d) Compare your contract curve with the conventional contract curve depicted in the text.

Reference no: EM131090281

Questions Cloud

The different degrees of market power : Provide an example of each of the four different ways industry is organized (the different degrees of market power) and explain why you believe them to be good examples.

What is the role of rock lyrics in suicides among teenagers : "What is the role of rock lyrics in suicides among teenagers?" Do you think that a rock group could be held responsible for a death that occurred after a young person had repeatedly listened to their morbid, suicide-praising lyrics?

What happens to aggregate demand : Suppose that the government decreases spending by $100 billion. What happens to aggregate demand? What is the likely effect on prices and output? Where are the new equilibrium price level and GDP relative to the old levels?

Innovation in glass : The industrial essay is based on a presentation on the topic “Innovation in Glass” by Dr Nick Kirk who is the technical director at GTS, Glass Technology Service Ltd. The essay begins with a brief synopsis of the company,

Contract curve with the conventional contract curve depicted : Suppose that Hannah’s utility function is UH = 4C + 3T and that Jose’s utility function is UJ = 3C + 4T, where C is pounds of coffee per year and T is pounds of tea per year. Suppose there are fixed amounts of 28 pounds of coffee per year and 21 poun..

How are their labor supply decisions affected : Suppose that individuals view their loss of income from imposing a single marginal tax rate as offset by the benefits of public services purchased with the revenues so that the (representative) individual is just as well off as before. How are their ..

About the exchange rate : The exchange rate between China’s Yuan and India’s Rupee yesterday was 10.79 Rupee per Yuan. If the exchange rate today is 11 Rupee per Yuan, Which currency appreciated in value? Why or Why not?

Regard to the protection of civil rights and civil liberties : Discuss one example of how the federal government intervened in the state of Texas with regard to the protection of civil rights and civil liberties. Please be specific and give details of how the Federal Government stepped in to protect the rights o..

Why is this cartoon an appeal to fear : Why is this cartoon an appeal to fear? Who is the person in the tent? What is the fear that the cartoon plays upon? Are there other fallacies that we've studied that you think might be at work in this cartoon? "If cartoons can contain fallacies, then..

User Account

All Pages