# Edgeworth Box

If I had initial endowments XA = (0, X2), and XB = (X1, 0)

Is there any impact if both goods were inferior, X2 for A and X1 for B?

If I started with one equilibrium p* and went to another p* that had a higher price for X1, could the second p* be an equilibrium (using a Slutsky decomposition and keeping in mind the inferiority information supplied)?

#### Solution Preview

...ny impact in the equilibrium if both goods were inferior. Because, in that case, the MRSA will remain = the MRSB. That means, the Marginal Rate of Substitution between the two goods X1 and X2 for both A and B would remain the same.

From the figure below, suppose, you start with one equilibrium p* at which the endowments are A(XA-1, XA-2 ) and B(X1XA-1 , X2XA-2). Now, you move to another point p* that had a ...