Initial allocation of cheese also bread is pareto efficient

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Reference no: EM1313461

Q. Consider a simple economy with two individuals, John also Marsha. The economy is endowed with 30 kilograms of cheese also 30 loaves of bread each month. John also Marsha's preferences for bread also cheese are given by their marginal rate of substitution of bread for cheese:

Marsha: John:

Where is the quantity of bread consumed by Marsha also is the quantity of bread consumed by John.

a) If each individual only had one loaf of bread, explain how much cheese would each individual be willing to give up in order having another loaf of bread?
b) In the initial allocation, each individual has 15 kilograms of cheese also 15 loaves of bread. Draw the Edge worth Box diagram for this economy also Explicate whether the initial allocation of cheese also bread is Pareto efficient.

Reference no: EM1313461

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