Question

Consider an exchange economy with 2 consumers (A and B) and 2 goods (x1 and x2). Consumer A has 8 units of x1 and 5 units of x2, while Consumer B has 4 units of x1 and 10 units of x2. Consumer A's utility function is and Consumer B's utility function is Then the endowment is Pareto optimal. Question 2 options: True False 

          Consider an exchange economy with 2 consumers (A and B) and 2 goods (x1 and x2). Consumer A has 8 units of x1 and 5 units of x2, while Consumer B has 4 units of x1 and 10 units of x2. Consumer A's utility function is
and Consumer B's utility function is
Then the endowment is Pareto optimal. 
Question 2 options:
 True
 False
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Principles of Economics
Principles of Economics
Gregory Mankiw 8th Edition
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Consider an exchange economy with 2 consumers (A and B) and 2 goods (x1 and x2). Consumer A has 8 units of x1 and 5 units of x2, while Consumer B has 4 units of x1 and 10 units of x2. Consumer A's utility function is and Consumer B's utility function is Then the endowment is Pareto optimal. Question 2 options: True False
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Transcript

-
00:01 Here for the answer.
00:03 The answer is true.
00:05 Here the answer for the problem is true.
00:08 Now for the explanation.
00:10 Before we go further, first we know the basic condition for paretoefficiency.
00:17 Efficiency in exchange.
00:19 In simple words, mrs between two good must be equal to the price ratio of their prices...
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