ECON 230D1 Final: ECON 230D1 Study Guide
2 Jun 2017
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Their endowments of goods 1 and 2 are. 6 units of good 1 units of good 2. Edgeworth and bowley devised a diagram, called an edgeworth box, to show all possible allocations of the available quantities of goods 1 and 2 between the two consumers. The dimensions of the box are the quantities available of the goods. How can all of the feasible allocations be depicted by the. One feasible allocation is the before- trade allocation; i. e. the endowment allocation. Denotes an allocation to x xa a. An allocation is feasible if and only if. All points in the box, including the boundary, represent feasible allocations of the combined endowments. An allocation of the endowment that improves the welfare of a consumer without reducing the welfare of another is a pareto-improving allocation. Since each consumer can refuse to trade, the only possible outcomes from exchange are pareto-improving allocations.
