I am stuck trying to illustrate poverty in an Edgeworth box. How do I begin thinking about this problem?
To illustrate poverty in an Edgeworth box, you need to understand the concept of income distribution and inequality. The Edgeworth box is a graphical tool used in economics to represent the possible allocations of goods between two individuals, typically referred to as "consumers" or "agents." It consists of a rectangle divided in half and represents the initial endowments of each individual.
To illustrate poverty in an Edgeworth box, you will need to consider the income levels and distribution of the two individuals involved. Poverty can be represented by a lower income level and a limited allocation of goods for one or both individuals.
Here are steps to think about while addressing this problem:
1. Determine the individual's initial endowments: Start by identifying the initial allocation of goods or resources for each individual. These endowments represent the starting point for each person and will be used to distribute goods in the Edgeworth box.
2. Analyze individual income levels: Assess the income levels of the individuals. If you are trying to illustrate poverty, one or both individuals should have low income levels relative to the other. This will help demonstrate the inequality and poverty within the Edgeworth box.
3. Allocate goods within the Edgeworth box: Using the initial endowments and income levels, allocate goods within the Edgeworth box. This allocation should reflect the income disparity and limited access to goods for the individual(s) experiencing poverty.
4. Label and explain the illustration: Add labels and descriptions to your Edgeworth box to clearly indicate the income levels, individual endowments, and the resulting allocation of goods. This will help viewers understand the poverty being depicted.
Remember, the Edgeworth box is a tool to visually represent economic scenarios, so it's important to clearly communicate the income disparity and poverty within the illustration. Additionally, incorporating real-world data or specific scenarios can enhance the accuracy and relevance of your illustration.