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Consider a simple economy with two goods, clothing and food, and two consumers Jacob and Will....

Consider a simple economy with two goods, clothing and food, and two consumers Jacob and Will. Jacob is endowed with 100 units of clothing and 100 units of food. Will is endowed with zero units of clothing and 200 units of food. Suppose that Jacob’s optimal demand for clothing is C = 50 + 50PF / PC where PF is the price of food and PC the price of clothing. Will’s optimal demand for clothing is C = 100PF / PC.

a. Suppose that PC = 2 and PF = 4. Draw the Edgeworth box, initial allocation and budget constraint.

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