Question

Two people trade two goods that they cannot produce. Suppose that one consumer’s indifference curves are bowed away from the origin—the usual type of curves—but the other’s are concave to the origin. In an Edgeworth box, show that a point of tangency between the two consumers’ indifference curves is not a Pareto-efficient bundle

Answer 1

The consumer with the concave indifference curve will be referred to as the concave consumer. On an Edgeworth box, his indifference curves look like this. On the left side of the Edgeworth box lies his origin.