Illustrate the endowment in an edgeworth box

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Mutt and Je are going to trade corned beef and cabbage. Mutt has 4 pounds of cabbage and no beef, and Je has 4 pounds of beef and no cabbage. Mutt is indifferent between corned beef and cabbage. Je always consumes corned beef and cabbage in fixed proportions of 1:1.

(a) Illustrate the endowment in an Edgeworth box. Draw some of their indifference curves. Shiw the locus of Pareto efficient allocations

(b) If Mutt and Je were to trade using a competitive market, what would be the equilib- rium ratio of the price of corned beef and the price of cabbage? What would be the equilibrium consumption bundle for Je ?

Reference no: EM131387180

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