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Imagine a simple economy with only two people Augustus and Livia a Let the social welfare function be W UL UA Where UL and VA are the utilities of Livia and Augustus respectively Graph the

Imagine a simple economy with only two people. Augustus and Livia.

 

a. Let the social welfare function be

W = UL + UA

Where UL and VA are the utilities of Livia and Augustus, respectively. Graph the social indifference curves. How would you describe the relative importance assigned to their respective well-being?

b. Repeat part a when

W = UL + 2UA

c. Assume that the utility possibility curve is as follows: Graphically show how the optimal solution differs between the welfare functions given in parts a and b.

Apr 27 2020 View more View Less

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