PS11 - Intermediate Microeconomics Winter 2008 Problem Set...

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Intermediate Microeconomics, Winter 2008 Problem Set No 11 due: Monday, March 3; Tuesday, March 4 Problems Please, answer the following questions from the book: Chapter 17: 16, 22a+b, 25. Chapter 10: 10, 12 Q1. There are two individuals A and B in the economy with utility functions U A ( q 1 ; q 2 ) and U B ( q 1 ; q 2 ) over the consumption of the goods q 1 and q 2 . We will denote by q i j the amount that individual i consumes of good j , i.e., q A = q A 1 ; q A 2 ± is the bundle consumed by A . The endowment of individual i is e i = e i 1 ; e i 2 ± . The total endowment is e = ( e 1 ; e 2 ) , e j = e A j + e B j . A pair of bundles q A and q B uses up all ressources if A and B together consume the original total endowment, i.e., if the bundles q A and q B are such that e j = q A j + q B j for both goods j . For the following utility functions and total endowments: Draw the Edgeworth box corresponding to this economy with A in the lower left and B in the upper right corner. Include in your graph a few indi/erence curves for individual A and for individual B . Show the original endowment. Show one pair of bundles that uses up all the ressources and that both individuals strictly prefer to their original bundle and show one pair of bundles that uses up all ressources and that both like less than their original endowment (if such bundles exist). 1. (a)

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PS11 - Intermediate Microeconomics Winter 2008 Problem Set...

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