The initial endowment of goods:
A)has no effect on the equity of the final outcome.
B)does not affect the relative importance of the goods to each consumer.
C)determines the unique outcome of exchange between the two consumers.
D)affects the final distribution of goods along a contract curve.

Question

Quizplus · Accepted Answer

The initial endowment of goods affects the final distribution of goods along a contract curve. This is because the contract curve represents the set of efficient allocations that can be achieved through exchange, and the initial endowments determine the feasible allocations that the two consumers can potentially reach. Therefore, different initial endowments will result in different final allocations and distribution of goods after exchange.

The Initial Endowment of Goods