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Suppose there are two people, Cemal and Nisa, who must split a fixed income of 2000. The marginal utilities of income for Cemal and Nisa are as follows:
MUC = 510- 3 IC
MUN = 510- 6 IN where IC and IN are incomes of Cemal and Nisa respectively.
a) Draw the MU of Cemal and Nisa in the same Edgeworth box diagram.
b) What is optimal distribution of income if social welfare function is additive?
c) What is the optimal distribution if society values only the utility of Cemal?
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