Answer Happy

Part 1 Suppose that Dua Lipa and Chip Skylark are thinking about trading plums and bananas at the 25 b5 and Chip has .5 = p local farmers market. Dua Lipa has the following utility function u(p, b) the following utility function u(p, b) = pb. Dua Lipa has an endowment set of (2,3) and Chip begins with an endowment set of (3,8). Solve for the marginal rate of substitution for each person at the endowment point. Part 2 A. What is a trade that Dua Lipa would accept but Chip wouldn't? B. What is a trade that Chip would accept but Dua Lipa wouldn't? C. What is a trade both Dua Lipa and Chip would accept that would be a Pareto improvement (it doesn't have to be Pareto optimal)? Part 3 Find two Pareto optimal points along the contract curve