Again assume that the economy has 9 units of good X, and nine units of good Y, t
ID: 1194178 • Letter: A
Question
Again assume that the economy has 9 units of good X, and nine units of good Y, to divide between Hamlet and Ophelia. Now Hamlet has the utility function U_H(x_H,y_H) = x_H+y_H and Ophelia has the utility function U_0(x_0,y_0) = X_0+4 root of y_0. This makes X a numeraire good. Assume that surplus is our measure of social welfare. Among all the allocations that maximize surplus, which is the best for Ophelia What utility does she get in that allocation Draw the utility possibilities curve, with Ophelia's utility on the horizontal axis. Show the exact coordinates of the intercepts and of the endpoints of the straight segment in the middle of the curve. For each of those four points, specify exactly what allocation of X and Y achieves that allocation of utilities. (extra credit) In the Edgeworth Box, show the Pareto efficient allocations of goods X and Y.Explanation / Answer
the answer is 4.5 units