Re: DSE2009 (Ques#29, Option A)

Posted by Rain Man on Jun 06, 2012; 6:31pm
URL: http://discussion-forum.276.s1.nabble.com/DSE2009-Ques-29-Option-A-tp7577497p7577528.html

the first agent's utility fn is  ( x + 2y ) ^2 . so it is a case of perfect substitutes // indifference curves will be straight lines
the second agent's utility fn is x + y , so this too is a case of perfect substitutes // indifference curves will be straight lines

but the magnitude of the slope for agent 2 > the magnitued of the slope for agent 1 .

so when we draw the indifference curves we find that the utility of agent 2 can be increased w/o affecting the utility of agent 1. and the optimum (efficient) point is reached along the Y axis where x = 0 and y varies .