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HW 5 Answers - Econ 100B Tang Homework 5 Ch 10 Due Thursday...

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Econ 100B: Tang Winter Quarter 2009 Homework 5: Ch. 10 Due Thursday March 12, 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 1-for-1 substitutes. Jose regards almonds and cashews as perfect 1-for-1 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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Econ 100B: Tang Winter Quarter 2009 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.
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