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Microeconomics 2nd Edition by Douglas Bernheim
Edition 2ISBN: 978-0071287616Microeconomics 2nd Edition by Douglas Bernheim
Edition 2ISBN: 978-0071287616 Exercise 5
Repeat Worked-Out Problem 16.2 with the following assumptions: Lauren's utility function is
Humphrey's utility function is
and their initial endowments are F H = 2, F L = 8, W H = 24, and W L = 16.
Worked-Out Problem 16.2
Figure 16.14 Solution to Worked-Out Problem 16.2. Humphrey's indifference curves are shown in red and Lauren's in blue. The contract curve is the diagonal line running between the southwest and northeast corners of the box. The equilibrium ratio of the price of food to the price of water will be 2. Starting from point A, Humphrey and Lauren will trade along the green budget line to point B.
Humphrey's utility function is and their initial endowments are F H = 2, F L = 8, W H = 24, and W L = 16.Worked-Out Problem 16.2
Figure 16.14 Solution to Worked-Out Problem 16.2. Humphrey's indifference curves are shown in red and Lauren's in blue. The contract curve is the diagonal line running between the southwest and northeast corners of the box. The equilibrium ratio of the price of food to the price of water will be 2. Starting from point A, Humphrey and Lauren will trade along the green budget line to point B.
Explanation
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Microeconomics 2nd Edition by Douglas Bernheim
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