Asked by
Nicole Dingess
on Oct 14, 2024Verified
If the initial endowment is on the contract curve, then there must always be a competitive equilibrium in which no trade takes place.
Contract Curve
In economics, it's the locus of points representing the final allocation of goods or resources that cannot be improved upon from the perspective of any individual without worsening the condition of another, particularly referenced within the Edgeworth box for pure exchange economies.
Competitive Equilibrium
A market state where supply meets demand, leading to an optimized distribution of goods and services among competing actors.
- Ascertain the scenarios where a Pareto efficient allocation aligns with a competitive equilibrium.
- Understand the role of initial endowments in determining allocations in pure exchange economies.
Verified Answer
NG
Learning Objectives
- Ascertain the scenarios where a Pareto efficient allocation aligns with a competitive equilibrium.
- Understand the role of initial endowments in determining allocations in pure exchange economies.