Illustrate what is the equilibrium quantity of bananas

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(b) Marilyn and Chen live in an isolated valley and trade with no one but each other. They consume only bananas and tomatoes. Marilyn has an initial endowment of 4 bananas and 11 tomatoes. Chen has an initial endowment of 20 bananas and 27 tomatoes. For Marilyn, the two goods are perfect substitutes, one for one. For Chen, they are perfect complements, one for one.

(i) Draw the Edgeworth box, with Marilyn on the bottom left corner and Chen on the top-right corner, and accurately label the endowment point.

(ii) In competitive equilibrium, what is the ratio of the price of bananas to the price of tomatoes?

(ii) What is the equilibrium quantity of bananas and tomatoes consumed by Marilyn and Chen?

Reference no: EM1363518

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