Question: jim and stacy are the only two consumers on an...
Jim and Stacy are the only two consumers on an island. Jim has 40 Apples and Stacy has 40 Pop Tarts.
- Is the current allocation efficient? If not, use an Edgeworth box to demonstrate why.
- Assume Jim trades 10 Apples for 10 of Stacy's Pop Tarts. How do I know this trade improves overall welfare?
- Now, assume that Stacy is health-conscious and refuses to eat Pop Tarts at all. Describe the set of efficient allocations under this assumption.