The accompanying diagram shows an Edgeworth box economy. The initial endowment is point O. At current relative prices, Augie chooses point X and Bev chooses point Y

-Refer to Edgeworth Box Economy.Analysis of an Edgeworth box economy shows that a competitive equilibrium

Question

The accompanying diagram shows an Edgeworth box economy. The initial endowment is point O. At current relative prices, Augie chooses point X and Bev chooses point Y

-Refer to Edgeworth Box Economy.Analysis of an Edgeworth box economy shows that a competitive equilibrium

Quizplus · Accepted Answer

In an Edgeworth Box, a competitive equilibrium is a point where supply equals demand for both goods, and it must be Pareto optimal, meaning no reallocation can make someone better off without making someone else worse off.

The Accompanying Diagram Shows an Edgeworth Box Economy