Post a New Question

MICRO ECON

posted by .

IS this true or False

In a competitive pure exchange economy with two consumers and two goods, if one consumer has perfect complement preferences and the other has perfect substitutes then the contract curve is along the outer edge of the Edgeworth Box.

  • MICRO ECON -

    I think false. Draw the indifferece curves for each person. For the perfect complements case, the guy must have both goods in equal quantities. Assuming a 1-for-1 complement, he will consume along a 45-degree line, and each indifference curve looks like a corner of a box, the point of the corner lying on the 45 degree line. (If its say, a 2-for-1 compliment, the guy will consume along a 30-degree line)
    The perfect substitute guy has indifference curves that are straight. So, There will be an interior tangent.

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. 3 Questions

    I have three True/False questions. If they are false, please explain why. It is due Monday. 1. A shift in supply causes the price of a good to rise. The shift must have been an increase in supply. I think this is True. 2. The price …
  2. Economics(micro)

    hey, could someone please give me some tips for the following questions. iv got a test coming up, and one of these 4 questions will be in it..... so i have to write 4 essays n learn it. i just need a few points to put my essay together. …
  3. Economics

    Heres one IM SURE economist will enjoy... Always saying MC = MR :) Please help... I know its something to do with Perfectly competitive firms being price takers! right?
  4. micoeconomics

    in regards to equilibrium in exchange and production. An exchange economy is characterised by the number of agents in it, the preferences or utility functions of the agents, the number of goods and the endowments of the agents. by …
  5. Micro Econ

    Some texts define a "luxury good" as a good for which the income elasticity of demand is greater than 1. Suppose that a consumer purchases only two goods. Can both goods be luxury goods?
  6. Mircoeconomics

    A significant difference between monopoly and perfect competition is that: A. free entry and exit is possible in a monopolized industry but impossible in a competitive industry. B. competitive firms control market supply but monopolies …
  7. microeconomics

    Describe the adjustments in the production possibilities curves in each of the following situations for the United States economy. You should use a graph of a production possibilities curve in your explanation of each scenario. The …
  8. economics

    There are two goods 1 and 2. Denote by (x1; x2) the consumption bundle consisting of x1 units of good 1 and x2 units of good 2. A consumer has preferences that described by the linear utility function: u(x1; x2) = x1 + 2x2: 1. Write …
  9. ECON

    Assume that a consumer’s indifference curve is bowed outward but satisfies the other three properties of indifference curves. As the consumer moves from left to right along the horizontal axis, the consumer’s marginal rate of substitution
  10. History

    Please check my answers please. Thank you! 1. The U.S. economy is a free enterprise system. True* False 2. Work you do for pay is called a _____. service industry diverse workforce job* volunteer job 3. When there are many people seeking …

More Similar Questions

Post a New Question