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Topic: contract curves
Conf: Chapter 5, General Equilibrium, Msg: 14229
From: Martin Caley (martin.caley@economics.treasury.gov.im)
Date: 2/25/2004 07:47 AM
contract curves Martin Caley MCaley martin.caley@economics.treasury.gov.im
For the two good, two person case let total endowment be (X,Y) and person one's consumption be (x,y).
Suppose Y>=X. Then the contract 'curve' is given by the set
{(x,y):x in [0,X], y in [0,Y],x<=y<=x+Y-X}.
When X=Y this reduces to a straight line across the Edgeworth Box.
For X>=Y, the contract curve is{(x,y):x in [0,X], y in [0,Y], y<=x<=y+X-Y}.
I got a sheet of paper, drew some L-shaped indifference curves, made an acetate and slid them around.