This is a great video and helps me a lot for my exam tomorrow. One quick question, how do you know where to put point E, and how do you know where the indifference curves will be located, thus giving us the contract curve. Thank you!
Thank you for your comment Gordon. Point E is their endowment, so it would be given in a problem (e.g. one person has 10 of one good and 5 of the other, the other person has the reverse), so you would just graph it using the numbers you are given. As for the indifference curves, you would have to know each person's utility function, and then use those functions to graph the indifference curves. I have other videos that demonstrate how to do this. Thank you for watching!
Hi Saarthak. There really isn't a follow-up to this one. This is the last one in the competitive markets series. I didn't make a video for how to solve for the equilibrium solution algebraically, but I can add that to my "to do" list.
Rachel - we know this from the position of the endowment dot. The total amount of Good 1 is measured by the length of the box. Since Person A's endowment of Good 1 goes past the halfway point lengthwise, they have more of Good 1 than person B does. Similarly, the total amount of Good B available is the height of the box. Since Person A's amount of good 2 is below the halfway point, height-wise, they have less of good 2 than Person B does. Hope this helps. Thank you for your question!
Coco - yes the F point (it shows up as E on my screen, not sure why you're seeing it as F) is the endowment point. At any point where Persons A and B are willing to trade, it must be the case that their marginal rates of substitution are equal. Otherwise, one person won't accept the other person's offer.
@@KatherineSilzCarson shouldnt it be " mrs are not equal" because mrs is same means they are on contract curve so they are not willing to trade as one cant be better off without making other worse off?
@@KananGasimov Yes. Person A and Person B will be willing to trade as long as their MRSes are not equal. The equality of the MRSes defines the price at which they'll trade, and the contract curve describes the locus of points to which they will trade. Once they get to one of those points, no further trades will happen. Thank you for asking this important clarifying question.
Your endowment is what you start off with. Think of it as your budget (income). However, in this case, instead of having money, you start of with a quantity of each good, which you can sell/trade for some other good if you want. Hope this helps! Thank you for watching!
Best Video Tutorial on RUclips to understand Edgeworth Box model (in less than 10 minutes)
Thanks you so much:)
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This is so easily explain...thank you for the video...
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Explained so simply and very helpful :) Thank you!
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Katherine Silz-Carson why did you stop 😢😢😢😢I love your work .Good Luck in whatever you doing 🙏🙏🙌👍🌷🌹
Very good explanation. Thank you!
Thank you for watching, Shrutika!
thank you😊
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amazing thank u
Thank you!
This is a great video and helps me a lot for my exam tomorrow. One quick question, how do you know where to put point E, and how do you know where the indifference curves will be located, thus giving us the contract curve. Thank you!
Thank you for your comment Gordon. Point E is their endowment, so it would be given in a problem (e.g. one person has 10 of one good and 5 of the other, the other person has the reverse), so you would just graph it using the numbers you are given. As for the indifference curves, you would have to know each person's utility function, and then use those functions to graph the indifference curves. I have other videos that demonstrate how to do this. Thank you for watching!
that is really helpful
I am glad it was helpful for you. Thank you for watching!
Where do we find the follow up video to this one?
Hi Saarthak. There really isn't a follow-up to this one. This is the last one in the competitive markets series. I didn't make a video for how to solve for the equilibrium solution algebraically, but I can add that to my "to do" list.
This video was mighty helpful to me, so definitely makes sense to add it to your to do list haha.
Ha ha indeed!
I'm not entirely sure as to why Person A has less of good 1 and more of good 2? Same with Person B. How are you able to determine this?
Rachel - we know this from the position of the endowment dot. The total amount of Good 1 is measured by the length of the box. Since Person A's endowment of Good 1 goes past the halfway point lengthwise, they have more of Good 1 than person B does. Similarly, the total amount of Good B available is the height of the box. Since Person A's amount of good 2 is below the halfway point, height-wise, they have less of good 2 than Person B does. Hope this helps. Thank you for your question!
So the F point is the endowment dot? And the tangent line where MRSa = MRSb is the standard measure to compare with the endowment point?
Coco - yes the F point (it shows up as E on my screen, not sure why you're seeing it as F) is the endowment point. At any point where Persons A and B are willing to trade, it must be the case that their marginal rates of substitution are equal. Otherwise, one person won't accept the other person's offer.
@@KatherineSilzCarson shouldnt it be " mrs are not equal" because mrs is same means they are on contract curve so they are not willing to trade as one cant be better off without making other worse off?
@@KananGasimov Yes. Person A and Person B will be willing to trade as long as their MRSes are not equal. The equality of the MRSes defines the price at which they'll trade, and the contract curve describes the locus of points to which they will trade. Once they get to one of those points, no further trades will happen. Thank you for asking this important clarifying question.
Love from india
Thank you!
What the meaning of endowment!
Your endowment is what you start off with. Think of it as your budget (income). However, in this case, instead of having money, you start of with a quantity of each good, which you can sell/trade for some other good if you want. Hope this helps! Thank you for watching!
Thank you so much for this amazing video! so helpful!!!😍😍😍
I am glad you found this helpful. Thank you for watching!
Thank you mam
Thank you for watching!