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Econ 100B: Tang
Spring Quarter 2008
Homework 5: Ch. 10
Due Thursday June 5, at the beginning of class.
Please write your name and PID on your homework.
1)
Consider the following Edgeworth box, showing indifference curves for two
consumers A and B, an endowment point (
E
), and eight sample allocations (a, b,
c, d, f, g, h, and i).
B’s indifference curves are linear and all have the same
slope.
A’s indifference curves are standard shaped.
a)
Which of the points are Pareto efficient?
b)
Which are Pareto superior over the initial allocation E?
a) h, c, d, f, and i are all pareto efficient
b) b, c, d, and f are pareto superior to E
2)
Suppose that the only goods in the economy are 100 units of almonds and
200 units of cashews.
Megan has an initial allocation of 50 units of
almonds and 100 units of cashews. She regards almonds and cashews as
perfect 1for1 substitutes.
Jose regards almonds and cashews as perfect
1for1 complements; he only wants to consume them together.
Sketching
almonds on the vertical, cashews on the horizontal, Megan’s origin in the
bottom left and Jose’s in the upper right, sketch the Edgeworth box for the
situation.
Label the initial allocation as A, and shade the set of allocations
(hint: it will be an area in the figure) that are Pareto superior to the initial
allocation.
A
B
E
U
A
U
B
a
b
c
d
f
g
h
i
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View Full DocumentEcon 100B: Tang
Spring Quarter 2008
0m is Megan’s origin, 0j is Jose’s origin, Am is quantity of Megan’s almonds, Cm is
Megan’s cashews, Aj is Jose’s almonds, Cj is Jose’s cashews.
The triangle that the label
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 Winter '07
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 Microeconomics

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