Reference no: EM132653732

Suppose there are 2 consumers, A and B. The utility functions of each consumer are given by:UA1/21/2UB

(X,Y)=XY

(X,Y)=3X+2Y

The initial endowments for A is:

W_X=10, W_Y=10;

For B is:

W_X=6, W_Y=6

a) Using an Edgeworth Box, graph the initial allocation (label it W) and draw the indfference curve for each consumer that runs through the initial allocation. Be sure to label your graph carefully and accurately.

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

c) What is the MRS for consumer B at the initial allocation?

d) Is the initial allocation Pareto efficient? How do you know?