The Edgeworth Box for Exchange
    Two consumers: Anne (A) and Bill (B). Two goods: X and Y.
    To set a new allocation: (1) click the allocation you want in the diagram, or (2) set how large a change you want for Anne's X and Y using the chXA and chYA scrollbars, then click 'View'.
    To change initial endowments or consumer preferences: Edit the dropdown list items you want to change, click 'Accept' for each change, and then click 'Initialize' to draw your new Edgeworth box.
    Some Edgeworth box exercises appear below the diagram.



Exercises:
    Warm-up
    1. Examining alternative allocations of X and Y
    2. Examining optimal allocations of X and Y
    3. How preferences affect the contract curve

    Warm-up (return to diagram):
    a. Changing allocations: Method1: (1) Click the diagram near the value of XA=80 and YA=80; notice how that sets your new allocation of X and Y. (2) Click the diagram again anywhere else and note that the Edgeworth box diagram displays up to 3 allocations: your initial allocation (blue), your current allocation (red), and your previous allocation (gray).
    Method2 (Click 'Reset' to start over.) (1) Use the 'chXA' scrollbar to set a value of 12 for the change in A's allocation of X. (2) Use the 'chYA' scrollbar to set a value of -18 for the change in A's allocation of Y. (3) Click 'View' to see your new allocation. (4) Click 'View' again to repeat the same-size change in allocation.
    b. Changing endowment levels: Click 'Reset' to start over. (1) Click the dropdown list box of 'edit' items, and select 'A's Y endowment'. (2) Use the horizontal scrollbar to lower the value from 90 to 60. (3) Click 'Accept'. (4) Repeat steps (1)-(3) to lower B's X endowment to 60. (5) Click 'Initialize' and notice the new setup for your Edgeworth box.
    Note1: if you raise the combined endowment of either product above 120, the Edgeworth box remains at its maximum display size, and the axes get rescaled.
    Note2: you can use the same method to change the preferences of the two consumers; both are set with an initial target budget share of 60% for good X. In terms of the model's underlying Cobb-Douglas utility functions, this setting corresponds to: UA = 10X.6Y.4. (The 10 is just a convenient fixed scalar used for both consumers.)

    1. Examining alternative allocations of X and Y (return to diagram):
    a. Click 'Reset' to get a fresh start. On your own sheet of paper, draw the Edgeworth box and the initial allocation of X and Y, including the initial indifference curves for A and B.
    b. Click the diagram and record (XA,YA)-(XB,YB) values for each of the following allocations (consider each case separately, and use the initial endowment allocation for comparison purposes; if you like, click 'Reset' to get a fresh start for each case):
An allocation which... Anne (A) Bill (B)
X Y X Y
    (1) is the initial (endowment) allocation.        
    (2) raises UA and lowers UB.        
    (3) raises UA and leaves UB unchanged.        
    (4) raises both UA and UB.        
    (5) leaves UA unchanged and lowers UB.        
    (6) leaves both UA and UB unchanged.        
    (7) leaves UA unchanged and raises UB.        
    (8) lowers UA and UB.        
    (9) lowers UA and leaves UB unchanged.        
    (10) lowers UA and raises UB.        
    c. Indicate approximately where each of the allocations you indicated in part b shows up in your Edgeworth box diagram.

    2. Examining optimal allocations of X and Y (return to diagram):
    a. Click 'Reset' to get a fresh start. On your own sheet of paper, draw the Edgeworth box and the initial allocation of X and Y, including the initial indifference curves for A and B.
    b. Click the diagram and record (XA,YA)-(XB,YB) values for each of the following allocations (consider each case separately, starting from the initial endowment allocation; click 'Reset' to get a fresh start for each case):
An allocation which... Anne (A) Bill (B)
X Y MRS X Y MRS
    (1) is the initial endowment allocation.            
    (2) maximizes UA while leaving UB unchanged.            
    (3) is a Pareto optimal allocation which raises both UA and UB.            
    (4) maxmizes UB while leaving UA unchanged.            
    c. In your Edgeworth box diagram: (1) draw the contract curve, (2) sketch the indifference curves corresponding to the allocaitons from part b, and (3) label each of the allocations.

    3. How preferences affect the contract curve (return to diagram):
    Click 'Reset' to get a fresh start. On your own sheet of paper, draw the Edgeworth box and the initial allocation of X and Y, including the initial indifference curves for A and B. Label the initial allocation with the letter 'E' (for 'Endowment point'), and label B's indifference curve as 'UBa'.
    a. If necessary, click the 'View Contract Curve' so that the contract curve shows up in the diagram. In your Edgeworth box diagram: (1) Draw the contract curve and label it 'CCa'. (2) Denote the other allocation where UA and UB intersect as point 'a'. (3) Label the actual XA and YA values which correspond to point a (you can find those values by clicking  the diagram at the other allocation where UA and UB intersect).
    b. From the dropdown list of 'Edit' items, select 'B's X preference', use the scrollbar to set its value at 30, and then click 'Accept'. Click 'Initialize' to view your new allocation. In your Edgeworth box diagram: (1) Draw the new contract curve ('CCb'). (2) Denote the other allocation where UA and UB intersect as point 'b'. (3) Label the actual XA and YA values which correspond to point b. (4) Sketch the new UB through points E and b and label it 'UBb'.
    c. Set 'B's X preference' to a value of 80, then click 'Accept' and 'Initialize'. In your Edgeworth box diagram: (1) Draw the new contract curve ('CCc'). (2) Denote the other allocation where UA and UB intersect as point 'c'. (3) Label the actual XA and YA values which correspond to point c. (4) Sketch the new UB through points E and c and label it 'UBc'.
    d. Ordinarily, a consumer's indifference curves do not intersect with each other. Explain why they ordinarily do not intersect and then why B's indifference curves do intersect with each other in this problem.
    e. Explain what accounts for the fact that 'CCa' is a straight diagonal line linking 0A and 0B, while 'CCb' lies entirely below the diagonal and 'CCc' lies entirely above the diagonal

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