Solved

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

Question 70

Essay

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.

Correct Answer:

verifed

Verified

In both cases,we find the contract curve...

View Answer

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions