Consider trade between two consumers (1 and 2)and two goods,X and Y.Suppose the total quantities of each good are 100 units.Each consumer has Cobb-Douglas preferences given by:
U(X,Y)= XY
What is the shape of the contract curve,i.e.derive the equation? How does the contract curve change is consumer one has the utility function
U(X,Y)= X²Y
while the other consumer's preferences are as before? Again,derive the equation for the contract curve.

Question

Quizplus · Accepted Answer

The Answer of Consider trade between two consumers (1 and 2)and two goods,X and Y.Suppose the total quantities of each good are 100 units.Each consumer has Cobb-Douglas preferences given by: U(X,Y)= XY What is the shape of the contract curve,i.e.derive the equation? How does the contract curve change is consumer one has the utility function U(X,Y)= X²Y while the other consumer's preferences are as before? Again,derive the equation for the contract curve.

Consider Trade Between Two Consumers (1 and 2)and Two Goods,X