tutorial_6 - ECOS 2001 Tutorial 6 1. Morris Zapp and Philip...

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ECOS2001 Tutorial 6 1 ECOS 2001 Tutorial 6 1. Morris Zapp and Philip Swallow consume wine and books. Morris has an initial endowment 0f 60 books and 10 bottles of wine. Phillip has an initial endowment of 20 books and 30 bottles of wine. They have no other assets and make no trades with anyone other than each other. For Morris, a book and a bottle of wine are perfect substitutes. His utility function is U(b,w)=b+w, where b is the number of books he consumes and w is the number of bottles of wine he consumes. Phillip’s has a Cobb-Douglas function, U(b,w) = bw. (1) Draw the Edgeworth Box in which Morris’s consumption is measured from the lower left and Phillip’s is measured from the upper right corner of the box. (2) Mark the initial endowment and label it E. Draw Morris’s indifference curve that passes through his initial endowment. Similarly, draw Philip’s indifference curve that passes through his initial endowment.
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tutorial_6 - ECOS 2001 Tutorial 6 1. Morris Zapp and Philip...

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