# 7010 - of clothing for every 2 units of food a Describe the...

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3/29/11 Note, for example, that both W and Z are Pareto preferred to the original allocation G. This follows because W is better than G from Bill’s point of view and no worse from Ann’s; and similarly, Z is better
3/29/11 1. Bert has an initial endowment consisting of 10 units of food and 10 units of clothing. Ernie’s initial endowment consists of 10 units of food and 20 units of clothing. Represent these initial endowments in an Edgeworth exchange box. 2. Bert regards food and clothing as perfect 1-for- 1 substitutes. Ernie regards them as perfect complements, always wanting to consume 3 units

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Unformatted text preview: of clothing for every 2 units of food. a. Describe the set of allocations that are Pareto preferred to the one given in Problem 1. b. Describe the contract curve for that allocation. c. What price ratio will be required to sustain an 3/29/11 3/29/11 • a) Describe the set of allocations that are Pareto preferred to the initial endowments. Bert’s preferences are shown above in blue, while Ernie’s are shown in pink. Pareto Preferred points are points that make someone better off without making anyone worse off. The shaded area (MAB) are points Pareto Preferred to the initial endowment....
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7010 - of clothing for every 2 units of food a Describe the...

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