Answers to Assignment 1
1a. See Figure 1a:
• The box is 5 by 7, reﬂecting the total endowments of goods 1 and 2. • Given their preferences, the households’ indiﬀerence curves are linear.
In Figure 1a, Household 1’s indiﬀerence curves are blue while those of Household 2 are red.
• The Pareto eﬃcient allocations are along the bottom and right edges of the box.