What do we know about the proportion of peanut butter

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Reference no: EM13160495

Adam only likes Peanut butter (P) and jam (J) when there is twice as much jam as peanut butter. That is, his utility function is Ua(P,J) = min(P,J/2). Bob, on the other hand, has the utility function Ub(P,J) = 2J + P. Suppose the total endowment is 10 units of peanut butter and 10 units of Jam.

(a) Draw the Edgeworth box of this situation and draw the contract curve

(b) What dowe know about the proportion of peanut butter to jam held by Adam in any equilibrium?

(d) If Adam held all of the peanut butter in the initial endowment, is it possible that he end up with nothing in the equilibrium?

(e) If Bob held all of the peanut buter in the initial endowment, is it possible that he end up with nothing in the equilibrium?

Reference no: EM13160495

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