DSE 2012

[Arushi :))]

consider a 2 person two good exchange economy where agents are denoted by A, B  and good by X, Y  a pareto optimal allocation of this economy will not remain pareto optimal if
1 everything else remaining the same A transfers a part of her endowment  to B
2 everything else remaining the same A gets additional endowment
3 everything else remaining the same As utility fuunction is monotonically transformed
4 All of these
Why the answer is b and why c is not the answer ..

[ViV]

Changes in endowment means redistribution of resources. If endowment changes then there could be possibility of pareto improvement in new allocation then the earlier allocation we had before the additional endowment.
In Monotonically transformation preferences will remain same. So it will not affect pareto optimal allocations.

[ViV]

In easy language : everything else remaining the same A gets additional endowment will increase the edgeworth box of the society. So Pareto optimal will not remain pareto optimal.

[Akshay Jain]

If the utility functions arw monotonically transformed then there is no change in the preferences (Or ICs) and so there is no change in the optimal demands of the consumer also coz there is no change in the income of the consumers vch is based on initial endowments (same as before)
in option b there is a change in the endowment of 1 consumer wich will effect his/her optimal dd given his new income based on new endowments.
so a parero optimal allocation will not be pareto optimal in case of change in endowments.... :)

[Dreyfus]

The contract curve will remain intact when utility functions are monotonically tranformed, you can see this by letting agents preferences be smooth nd convex so that their MRS's will yeild contract that will be an entire diagnol joining agent's origin. Now if u take monotonically transformed utility function then MRS will remain intact so does the contract curve!
But if endowment changes then dimension of Edgeworth will change thus contract curve will get affected.