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QUESTION

Person 1 and Person 2 meet for lunch. Person 1 brought 4 yams and 1 unit of fruit, while Person 2 brought 6 yams and 4 units of fruit to share.

Thanks so much for your help! Person 1 and Person 2 meet for lunch. Person 1 brought 4 yams and 1 unit of fruit, while Person 2 brought 6 yams and 4 units of fruit to share. At the lunch they decide not to share food, but to trade it instead. U(person1) = Qy^0.8Qf^0.2 and U(Person 2) = Qy^0.5Qf^0.5

1. Graph the endowments in an Edgeworth box.

2. Denote the bundles that would be Pareto improvements from the endowment.

3. Denote the Pareto optimal bundles among the Pareto improving bundles.

4. What are the equilibrium consumption bundles?

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