College Paper Writing Service-Mathematical Economics
Consider the following:
Where the above equations represent utility functions for two individuals. Further, assume each individual is endowed with a certain quantity of goods X and Y. Specifically, A has 12 units of X and 2 units of Y. B has 8 units of X and 12 units of Y.
Is this state of affairs Pareto efficient (i.e. can one person be made better off without making the other worse off)? If not, why not?
If it is not Pareto efficient, assume we allow A to design a new allocation of resources that is Pareto efficient.
If A acts to maximize utility (subject to the constraints of Pareto efficiency), how will A choose to allocate the resources?