Problem
Two individuals, Seth and Evan, live in an endowment economy. Seth has 1D slushies and 10 jugs of laundry detergent. Evan has 10 of each.
1) Draw an Edgeworth loo: that depicts the endowment.
2) Draw bowed indifference curves through the endowment point for Seth and Evan.
Explain in the least technical terms possible:
3) What is the definition of a Pareto improving allocation? Highlight one in your diagram.
4) What is the meaning of a contract curve? Add one to your diagram.
5) What is the significance of the core of this exchange economy? Highlight the core in your diagram.