Answer to Question #65015 in Other Economics for Mike Corwallace
Use an Edgeworth box to give an example of preference schedules (i.e. indifference curves) for a
case in which
the initial allocation is such that person 1 owns all beer and person 2 owns all sausages, and
this initial allocation is Pareto optimal.
1) at the initial allocation, for which person 1 owns all beer and person 2 owns all sausages, the point of outcome will be in the top left or in the bottom right vertex of the box, which will be not efficient.
2) the allocation that is Pareto optimal lies on the indifference curve, which passes the bottom left vertex, the central point and the top right vertex of the box.
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