This preview shows page 1. Sign up to view the full content.
Unformatted text preview: Atkins and Bodkins are y a / x a and y b / x b . Find the contract curve for this twoperson Edgeworth box. From society’s point of view, A ’s utility function is actually u A = x a y a + (10 – x a ) = x a y a + 10 – x a , so A ’s social MRS a = –( y a – 1)/ x a . Set the social MRS a equal to MRS b = y b / x b and substitute x b = 10  x a and y b = 10  y a to get the equation of the contract curve: y a = 1 + 0.9 x a . x a x b y a y b O b O a 5 5 10 10...
View
Full
Document
This note was uploaded on 10/26/2010 for the course ECONOMICS ECON 201 taught by Professor Dr.shomubanerjee during the Summer '07 term at Emory.
 Summer '07
 Dr.ShomuBanerjee
 Microeconomics, Utility

Click to edit the document details