Is the initial allocation pareto efficient

Reference no: EM13688018

Presume there are two consumers, A and B. The utility functions of each consumer are given by: UA(X,Y) = X*Y UB(X,Y) = 2X + Y The initial endowments are: A: X = 4; Y = 2 B: X = 6; Y = 8

1) Is the initial allocation Pareto Efficient?

2) What is the marginal rate of substitution for consumer A at the initial allocation?

3) What is the marginal rate of substitution for consumer B at the initial allocation?

4) Using an Edge worth Box, graph the initial allocation and draw the indifference curve for each customer that runs during the initial allocation. Be sure to label your graph carefully and accurately.

Reference no: EM13688018

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