Consider an Economy with Two Consumers, Annie and Bob, and Two

Essay

Consider an economy with two consumers, Annie and Bob, and two goods, 1 and 2. Annie's initial endowment is (4, 1), respectively, while Bob's endowment is (0, 7). Annie's utility function is x₁*x₂, while Bob's utility is min(x₁, x₂).
a)Draw an Edgeworth box, measuring Annie's consumption from the lower left corner. Indicate the endowment point and draw an indifference curve for each consumer.
b)Sketch the locus of the Pareto- optimal allocations.
c)If p₂ = p and p₁ = 1, compute Bob's income at these prices and his demand for good 2 at the same prices.