Andrew and Sarah are two traders in a pure exchange economy with two goods, Bikes and TVs. Suppose Andrew has preferences given by: U(B,T) = BT where B is the number of bikes and T is the number of TVs
Sarah only derives utility from TV, so her utility function can be given by: V(B,T) = T Describe the contract curve.
The contract curve will be points where Sarah consumes zero Bikes. Notice that any bundle in which Sarah's consumption of TVs is positive is Pareto dominated by the same bundle but with the quantity of Bikes reduced to zero.
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